- VNL Capital says the conflict in the Middle East has disrupted oil flows through the Strait of Hormuz, causing one of the largest recent global supply shortfalls
- While producers are rerouting exports, higher transport costs and limited alternatives are tightening supply and pushing oil prices upward
- The oil market has shifted into a fragile, geopolitically sensitive phase, where future price trends will depend largely on how prolonged the conflict becomes
Legit.ng journalist Victor Enengedi has over a decade’s experience covering energy, MSMEs, technology, banking and the economy.
A new report by VNL Capital Asset Management titled “Global shocks and market opportunities: How to invest in 2026” paints a stark picture of the current oil crisis, describing it as one of the most disruptive periods in recent energy history, driven largely by escalating tensions in the Middle East.
The report was delivered by Dr Ifeanyi Ubah, the company’s Chief Investment Officer, at a stakeholders’ roundtable held on Tuesday, March 24, 2026, themed “Global Uncertainty, Local Opportunity: Where to Invest in Nigeria”.
Source: UGC
Strait of Hormuz Disruption Triggers Massive Supply Shock
At the heart of the crisis is the effective constraint of the Strait of Hormuz, a critical artery through which roughly one-fifth of global oil supply passes.
According to the report, the conflict involving Iran, the United States, and Israel has severely disrupted energy flows, removing millions of barrels per day from global supply.
This disruption has forced major Gulf producers to cut output significantly, contributing to a projected global supply decline of about eight million barrels per day in March 2026.
VNL Capital describes the situation as one of the largest supply shortfalls in recent history, exacerbated by the lack of immediate alternative export routes for affected producers.
“This shock has created one of the largest supply shortfalls in recent history, particularly given the limited alternative routes available for exporters heavily reliant on the Strait of Hormuz. The lack of immediate substitution channels has amplified the severity of the disruption, tightening market conditions and increasing price volatility.”
Costly adjustments reshape global oil prices, logistics
In response, the global oil system is undergoing rapid adaptation. Producers such as Saudi Arabia are rerouting exports through alternative infrastructure like the East-West pipeline to the Red Sea, while shipping companies are diverting cargoes around Africa or relying more heavily on pipelines to bypass chokepoints.
However, the report notes that these adjustments come with higher transportation costs and logistical inefficiencies, which are further intensifying upward pressure on oil prices. The reliance on longer routes and constrained infrastructure is reinforcing market tightness rather than alleviating it.
VNL Capital also pointed to a major change in oil market dynamics, noting that what was previously seen as a surplus-driven outlook has evolved into a far more fragile and geopolitically exposed environment.
The report stresses that disruptions to supply can now spark rapid and disproportionately large movements in global oil prices.
The report stated:
“Overall, the current environment underscores a shift from surplus expectations to a more fragile and geopolitically sensitive oil market, where supply shocks can have immediate and outsized impacts on global prices.”
The severity of the disruption is amplified by limited substitution channels, meaning exporters dependent on the Strait of Hormuz have few viable alternatives in the short term. This has heightened price volatility and tightened supply conditions across global markets.
Outlook hinges on conflict trajectory
Looking ahead, VNL Capital stresses that the future of the oil market will depend heavily on how the Middle East conflict evolves.
A prolonged disruption is expected to sustain tight supply conditions and elevated prices, favouring producers with spare capacity or diversified export routes.
Ultimately, the report concludes that the crisis underscores the growing vulnerability of global energy systems, where geopolitical risks can swiftly reshape supply dynamics and market stability.
Source: Legit.ng
