Dr. Hamad Kasasbeh

Energy prices are no longer understood solely through the traditional balance of supply and demand. They have increasingly become tied to broader geopolitical developments shaping the global economic system. With rising tensions in the Middle East, the question is no longer just about where prices are heading, but about the forces that are shaping them—whether they reflect purely economic fundamentals or a growing use of energy as a tool of influence.

In the past, oil prices were largely determined by production and consumption dynamics. However, geopolitical shifts—especially in key producing regions—have introduced a new dimension. Production decisions, alliances, and signals related to critical transit routes now play a direct role in influencing market outcomes rather than acting as external factors.

In this context, the Strait of Hormuz serves as a clear example of this interaction. It is not only a major route for global energy flows, but also a strategic pressure point within regional and international calculations. Even the suggestion of disruption can raise what is commonly referred to as a “risk premium,” without any actual interruption in supply.

Markets themselves have also evolved. They no longer wait for events to occur before reacting; instead, they increasingly price in expectations. In many cases, markets behave as if they are purchasing insurance against potential risks, incorporating probabilities into prices before events materialize. This reflects a gradual shift from pricing reality to pricing anticipation.

From another perspective, prices no longer reflect only production and consumption levels. They are also influenced by the ability to affect the continuity of supply. In this sense, power in energy markets is no longer limited to production capacity, but extends to the ability to influence the stability of energy flows.

Within this framework, energy can be viewed as an indirect instrument in international relations. Producing countries may adjust output decisions within broader strategic considerations, while consuming countries seek to diversify supply sources and reduce reliance on regions exposed to instability. At the same time, many economies are accelerating investments in alternative energy as part of long-term strategies.

In conclusion, energy prices are shaped by an interaction of economic and political forces. As this interaction deepens, prices no longer reflect market equilibrium alone, but broader balances of power. Over time, this dynamic may contribute to a more diversified and resilient global energy system, less dependent on regions exposed to recurring geopolitical tensions.