How long will high oil prices last? Is it the smoke of the US-Iran conflict or the dusk of the US dollar oil system?

In the last week of March 2026, everywhere you look on your phone, people are queuing up to refuel. Why are everyone lining up to fill up? Will high oil prices continue? Let’s take a look:

1. Why did oil prices start to surge?

Strait of Hormuz: Once the choke point of global energy, about 20% of the world's oil consumption and 25% of liquefied natural gas exports passed through this Gulf country’s strait into the Indian Ocean daily. But with the escalation of the US-Iran conflict in late March, the Strait of Hormuz transformed from one of the busiest shipping lanes into the most dangerous waters in the world. The number of merchant ships passing through plummeted by 95%, and cruise ship insurance premiums soared by over 300%. Shipowners began to doubt the reliability of this maritime energy route, believing that sending oil tankers through Hormuz could no longer guarantee safe passage. As a result, oil exports from Saudi Arabia, Iran, the UAE, Kuwait, and Iraq were disrupted, causing oil prices to climb. International oil prices broke through the $100 mark.

2. When will oil prices fall back?

In fact, it’s not unusual for international oil prices to break into triple digits over the past 20 years. We’ve seen this before before the 2008 financial crisis, during the Arab Spring in 2011, and most recently during the Russia-Ukraine conflict in 2022. No matter how high prices go, they tend to fall back eventually.

But this time, the surge in oil prices is somewhat different.

1. Supply-side shock, not demand-driven: Past oil price hikes were usually driven by increased demand due to global economic growth. But this time, the price spike occurred amid a slowing global economy, with demand not overheating. The disruption was caused entirely by the Hormuz Strait incident, which cut off about 20 million barrels of oil per day from export.

2. Severe weakening of global buffer mechanisms: In the past, if problems arose in the Middle East, supply could be replenished from other regions. But now, OPEC+’s idle capacity has fallen to historic lows, and strategic petroleum reserves are also at record lows. Without a safety cushion, markets react very violently to shocks.

3. Geopolitical conflict premiums are no longer short-term factors: Previously, geopolitical conflicts were seen as pulse events—prices surged during conflicts and fell afterward. But the current Hormuz Strait incident involves major power rivalries, nuclear negotiations, regional hegemonies, and the dollar-pegged oil system. These conflicts suggest that the current high oil prices may not last for just a few months but could develop into medium- or long-term phenomena.

3. Great power rivalry: conflict is just a surface

The rise in oil prices is not solely due to the military conflict in the Strait of Hormuz. We need to think more deeply: why did the Strait of Hormuz become a flashpoint now?

Since the US shale revolution, the US has shifted from the world’s largest oil importer to a net exporter. The strategic importance of the Middle East has declined on the US balance sheet. Meanwhile, Asian economies like China and India have become increasingly dependent on Middle Eastern oil. This shift in supply and demand has prompted Gulf countries to reconsider their strategic positioning. More importantly, US sanctions and maximum pressure on Iran have reached a very awkward crossroads. Sanctions have not made Iran yield; instead, they have further stimulated Iran and its proxies to challenge the order more aggressively. During this transitional period, when the old framework is collapsing and the new one is not yet established, risk premiums will keep high oil prices sustained. Beyond the visible US-Iran conflict, the loosening of the petrodollar system is an invisible undercurrent.

The petrodollar system began in the 1970s, when the US and Saudi Arabia signed an agreement: Saudi Arabia would price its oil exports in dollars and invest the proceeds in US Treasury bonds in exchange for US military protection. This “oil for security” deal gave the dollar a special status, making all oil-consuming countries worldwide pay for US consumption. But this foundation is now loosening.

Changes:

1. De-dollarization attempts by oil-producing countries: On March 24, Saudi Aramco completed a crude oil transaction with a Chinese refining company priced in RMB.

2. Shift in supply-demand stance: As the US no longer relies on Middle Eastern oil, it no longer needs to defend the Gulf shipping lanes to secure its energy security. Gulf countries are also reassessing whether they still need to trade oil for security.

All these changes together suggest that the recent surge in oil prices is not only due to conflict but also presents a historic opportunity for the RMB.

4. The era of low oil prices is over

Three points indicate that the era of low oil prices has ended:

1. Since the oil price crash in 2014, major oil companies have been sharply reducing investment in exploration. Even if prices continue to rise, new oil projects take 3-5 years to come online, meaning supply response is slower than ever.

2. Ongoing geopolitical risks, such as the Russia-Ukraine conflict and Middle Eastern turmoil—from the Red Sea crisis to Hormuz Strait standoffs—will keep oil premiums high in the short term.

3. The only remaining option of linking oil to the dollar is ending. A multipolar energy currency system is forming, which means losing the stability of the dollar system. Exchange rate volatility, settlement risks, and reserve adjustments will all increase market volatility in oil.