Operation Epic Fury and Its Caribbean Fallout: How a New War Blew Up Jamaica’s Recovery

Jamaica Homes Global Conflict & Caribbean Impact Review — Edition 2 | Published 3 April 2026 | Reporting Period: 3 January – 2 April 2026

Quarterly Briefing

• US and Israel launch Operation Epic Fury on February 28; airstrikes kill Supreme Leader Khamenei.
• Iran closes the Strait of Hormuz on March 4; Brent crude surges toward $120 per barrel.
• Ukraine-Russia Geneva talks collapse after two days; Trump pressures Kyiv to cede Donbas.
• Gaza ceasefire endures but near-daily Israeli violations continue; political stalemate deepens.
• IMF disburses $415 million to Jamaica in January; BOJ cuts rate to 5.50% as inflation improves.
• Jamaica’s reconstruction momentum is abruptly overtaken by the worst oil shock in modern history.

A Quarter in Two Acts

The first quarter of 2026 will be remembered as two radically different stories separated by a single date. Before February 28, the story was one of cautious optimism: Jamaica’s reconstruction from Hurricane Melissa was gaining momentum, the International Monetary Fund had disbursed its first tranche of the $6.7 billion international financing package, the Bank of Jamaica had felt confident enough to cut interest rates, and diplomats in Geneva were at least talking about ending the war in Ukraine. After February 28, the story was something else entirely: a new war in the Middle East, a closed Strait of Hormuz, and the fastest peacetime oil price increase in modern history — a shock that landed on a Jamaica still rebuilding from its worst natural disaster and whose fragile economic recovery was not built to absorb $120 crude.

January: The Recovery Builds

The quarter began with genuine cause for optimism. On 1 January, the Bank of Jamaica announced that the International Monetary Fund had formally approved and disbursed the first US$415 million tranche of Jamaica’s reconstruction and recovery programme, anchoring the $6.7 billion international financing package assembled in December 2025. The disbursement signalled international confidence in Jamaica’s institutions and fiscal management, and provided immediate budget support for the government’s reconstruction priorities: restoring roads, drainage systems, public utilities and damaged housing stock across the parishes worst affected by Hurricane Melissa’s October 2025 landfall.

With oil trading comfortably in the mid-$60s to low-$70s — a range consistent with pre-war global supply and demand conditions — inflation in Jamaica had returned to the upper end of the Bank of Jamaica’s 4–6 per cent target range but was no longer accelerating. Governor Richard Byles presided over a Monetary Policy Committee decision in February to cut the policy rate to 5.50 per cent per annum, down from the 6.00 per cent level at which it had been set following the post-Melissa tightening cycle. The cut reflected the Committee’s assessment that supply-side inflationary pressures had largely stabilised, that the reconstruction programme was providing demand-side stimulus, and that a slightly more accommodative monetary stance would support private investment in the damaged economy without compromising price stability. It proved, in retrospect, to be the last decision the MPC would make in a world without an active Middle East war.

February: Geneva and the Edge of the Abyss

In Europe, February 2026 brought the third round of formal trilateral peace talks between the United States, Ukraine and Russia — the most serious diplomatic effort since the war began in 2022 to produce a negotiated settlement. The talks took place in Geneva on February 17–18, with the US delegation led by Special Envoy Steve Witkoff and Jared Kushner, and the Russian delegation by Vladimir Medinsky. The opening day lasted six hours and was described by participants as “difficult.” The second day ended abruptly after just two hours.

The fundamental obstacle was territorial. Zelenskyy told reporters after the talks that both the United States and Russia were pressing Ukraine to withdraw from the remainder of Donbas, with both sides apparently conveying the same message: “if you want the war to end tomorrow, get out of Donbas.” Ukraine’s position — that a ceasefire should be drawn along current front lines rather than requiring further territorial concession — was irreconcilable with Moscow’s demand for Ukrainian withdrawal. Trump’s public comment — “Ukraine better come to the table, fast” — suggested the US was more aligned with the Russian position on territorial terms than with Kyiv’s, creating a diplomatic crisis within the Western alliance and deep anxiety in European capitals.

For Jamaica and the Caribbean, the Ukraine war’s continued prosecution was a structural economic cost: elevated global grain prices, higher fertiliser costs, disrupted shipping insurance markets. The collapse of the Geneva talks suggested these structural pressures would persist for the foreseeable future. But by the third week of February, events in the Middle East had overtaken Ukraine as the dominant geopolitical concern in global markets.

February 28: Operation Epic Fury

On 28 February 2026, the United States and Israel launched coordinated airstrikes against Iran under the codename Operation Epic Fury, targeting military facilities, nuclear sites and senior Iranian leadership. The operation was the culmination of months of rising tension over Iran’s nuclear programme and its support for regional proxy forces. The strikes killed Supreme Leader Ali Khamenei, triggering an immediate and severe Iranian military response.

Iran’s Islamic Revolutionary Guard Corps retaliated by issuing warnings forbidding passage through the Strait of Hormuz, boarding and attacking merchant ships in the waterway, and laying sea mines. On 4 March, Iran formally declared the Strait of Hormuz “closed,” threatening to attack any ship that attempted to pass without Iranian authorisation. On 27 March, the IRGC issued an even more explicit statement: the Strait was closed to any vessel going “to and from” the ports of the United States, Israel and their allies. The roughly 20 per cent of the world’s seaborne oil trade and 25 per cent of its LNG that had routinely passed through the Strait was now effectively impounded.

The immediate market response was without precedent in the post-Cold War era. Brent crude, which had been trading at approximately $72 per barrel on February 27, began a near-vertical ascent. By mid-March it had reached an intraday high of approximately $120 per barrel. The International Energy Agency convened an emergency meeting and characterised the Strait closure as the largest supply disruption in the history of the global oil market. OPEC+ held emergency consultations but could not easily substitute supply for volumes that physically could not leave the Gulf. Shipping insurance premiums for vessels anywhere near the Persian Gulf rose to levels that made commercial operations economically impossible without extraordinary war-risk coverage.

Jamaica: The Moment the Recovery Stalled

For Jamaica, the onset of the Iran war was economically devastating in its timing. The island had just received its IMF disbursement, had just seen its central bank cut interest rates in a sign of improving conditions, and was in the midst of scaling up the most ambitious reconstruction programme in its modern history. Then, within days, the cost of the energy that powers construction equipment, fuels the trucks carrying building materials, generates the electricity running hotel facilities, and fills the tanks of the vehicles on which all daily economic life depends rose by a third — and was rising still.

At Jamaican service stations, the pass-through was rapid and visible. Regular-grade petrol, which had been retailing at approximately $151 per litre in late February, began rising immediately after the conflict’s onset, reaching $189.88 per litre by mid-May — an increase of 25 per cent in under three months. For households in the parishes hardest hit by Melissa, simultaneously managing storm damage repairs and sharply higher fuel and electricity bills, the cumulative burden was severe. For contractors on publicly funded infrastructure and housing reconstruction projects, cost budgets were being overtaken by events before the work was complete.

The JPS fuel surcharge mechanism translated rising global oil prices directly into electricity bills with a lag of several weeks. By early April, households and businesses were beginning to see those surcharge increases on their statements. BOJ Governor Byles, speaking publicly in late March, acknowledged that the February rate cut — made in a world where the inflation outlook appeared benign — had now been superseded by the new external environment, and that the MPC would need to reassess its stance at its next meeting. The fiscal position was also being complicated: the government’s budget had been calibrated on oil price assumptions from before the conflict, and the higher import bill was widening the current account deficit and putting modest pressure on the Jamaican dollar.

The construction and housing sectors entered April in a state of deep uncertainty. Developers assessing whether residential and commercial projects remained viable at current cost levels were becoming more selective. The pipeline of new hotel room development — critical to the government’s ambition of rebuilding tourist capacity ahead of 2026–27 — was at risk of slipping. The government maintained publicly that the reconstruction would continue and that international financing provided an important buffer, but acknowledged privately that the oil shock had fundamentally changed the economic arithmetic.

Gaza: The Ceasefire That Would Not Become Peace

The Gaza ceasefire, which had taken effect in October 2025, entered 2026 technically intact but operationally hollow. The Israeli military had continued near-daily operations within the Gaza Strip in ways that ceasefire monitoring bodies characterised as violations. On January 26, 2026, the body of Ran Gvili — the last of the 28 deceased Israeli hostages — was recovered by the Israel Defence Forces, completing the hostage-recovery phase of the peace plan. With the hostage issue resolved, international pressure for Israel to honour the broader terms of the ceasefire intensified, but produced little visible change in Israeli military behaviour. The political question of Gaza’s future governance — Hamas’s disarmament, the composition of a civilian administration, the reconstruction of the Strip’s devastated infrastructure — remained entirely unresolved.

At the UN Security Council, members were voicing growing frustration with Israel’s ceasefire compliance. The Palestinian question was raised repeatedly in the context of US commitments at the Council. For the Caribbean, the Gaza situation was primarily significant as an oil market risk: sustained instability in the Levant contributed to the broader Middle East uncertainty premium that was already, because of the Iran war, keeping energy prices elevated.

The Caribbean: Shared Pain, Different Positions

Across the Caribbean, the onset of the Iran war and the oil shock landed with varying but universally significant force. The oil-importing majority — Jamaica, Barbados, the Bahamas, the Eastern Caribbean states, Haiti, Cuba — faced the same arithmetic: higher fuel import bills, rising electricity costs, accelerating consumer price inflation, and widening current account deficits. For the smaller economies of the ECCU, whose currencies were pegged to the US dollar and whose central banks had limited tools for managing external shocks, the oil price surge presented a structural challenge that fiscal policy would need to absorb.

Trinidad and Tobago once again occupied the anomalous position of an oil and gas exporter in a rising price environment. State-owned petroleum company Petrotrin’s successor entities were benefiting from the higher prices, and the government’s windfall revenues provided a buffer against the global uncertainty. But the disruption to global LNG markets — Qatar, a major LNG exporter, was effectively shut out of the Hormuz corridor — created opportunities and complications for T&T as a competing LNG supplier, whose Atlantic Basin LNG exports were unaffected by the Strait closure.

Guyana continued to benefit from its Stabroek block production at elevated prices, with oil fund revenues accumulating at an accelerating rate. The Venezuela-Guyana Essequibo dispute remained a background tension, but Venezuelan economic difficulties — compounded by global market disruption and ongoing US sanctions pressure — had not produced new escalation toward Guyana’s offshore assets during the quarter. CARICOM as a body issued statements deploring the Iran war and calling for peace and freedom of navigation, reflecting the fundamental vulnerability of every small island developing state to disruptions in global shipping and energy supply routes.

Looking Ahead

As this edition is published on 3 April 2026, Jamaica and the Caribbean face a more challenging economic environment than at any point since the COVID-19 pandemic. The Iran war shows no clear signs of imminent resolution: the Strait of Hormuz remains closed, oil is trading near $100 per barrel, and the diplomatic framework for a ceasefire has not yet produced an agreement. Mediating parties including Oman, Qatar and several European states are actively engaged, and there is hope that a negotiated halt to hostilities could come in the weeks ahead — but that hope is not yet a forecast.

The Bank of Jamaica’s monetary policy committee faces its most difficult decision in several years at its next meeting: whether to reverse the February rate cut in the face of imported inflation, or to hold and risk second-round inflationary effects. For Jamaica’s construction and housing sectors, every week of elevated oil prices adds to the cost overruns that are already compressing project viability. For ordinary Jamaican households, the combined pressure of Melissa’s aftermath and rising energy costs is testing the resilience that years of financial hardship have built but not limitlessly stretched. The world’s wars are not Jamaica’s to end. But their consequences arrive here, through every tank of petrol, every electricity bill, every kilogram of imported flour.

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Jamaica Homes Global Conflict & Caribbean Impact Review is published quarterly, examining how wars, geopolitical tensions and major international crises have shaped Jamaica, the Caribbean and their economies.

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