Oil passes $100 per barrel

For ordinary people the implications are straightforward. Oil prices eventually flow through to petrol, diesel and transport costs. When crude rises sharply, the price of filling a car tends to follow. That's not great when many of us are experiencing a cost-of-living squeeze.

So what's happening?

Most spare production capacity sits in the same region where the conflict is unfolding. When tensions rise there, traders do not wait for a disruption to happen. They price the probability that it might.

But the situation may already be moving beyond a simple risk premium. The disruption is starting to affect the physical system. So what does that mean? Roughly a fifth of global oil supply normally passes through the Strait of Hormuz. If traffic through that corridor is disrupted, even partially, the effect on global supply is immediate.

Several Gulf producers have begun curtailing output as exports become more difficult. Storage fills quickly when tankers cannot load, and production has to be reduced.

Oil above $100 is therefore not simply a geopolitical reaction. It is the market recognising that one of the most critical arteries of the global energy system is under direct strain.