The Strait Closes: How War in the Middle East Sent Oil Prices Soaring and Jamaica’s Costs Spiralling

Publication Date: 3 April 2026  |  Reporting Period: 3 March – 2 April 2026

Monthly Briefing

• Iran closes the Strait of Hormuz on March 4; oil surges to near $120 per barrel.
• US-Israel Operation Epic Fury launched February 28 after Oman-mediated talks collapse.
• Jamaica Public Service Company warns customers of sharp electricity bill increases.
• Bank of Jamaica holds rate at 5.50%; inflation rises as energy costs feed through.
• Global economy placed on recession watch; IEA declares largest supply disruption in history.
• Jamaica reconstruction costs rise sharply as fuel and material prices spike.

War in the Gulf: Operation Epic Fury and the Strait of Hormuz

The month of March 2026 will be remembered as the moment a geopolitical crisis became a global economic emergency. On 28 February, the United States and Israel launched Operation Epic Fury — a joint air and maritime campaign targeting Iranian command and control centres, IRGC headquarters, ballistic missile sites, naval vessels and submarines, anti-ship missile installations, air defence capabilities and military airfields. The strikes killed several senior Iranian officials, including Supreme Leader Ali Khamenei, and were launched, according to subsequent reporting, on the basis of Israeli intelligence provided by Prime Minister Benjamin Netanyahu during high-level meetings in Washington earlier that month. Oman-mediated nuclear talks, which a senior Iranian official had suggested were close to a breakthrough, had been abandoned by President Trump just days earlier as insufficient.

Iran’s response was swift and strategically targeted. By 4 March, Iranian forces had declared the Strait of Hormuz effectively closed, deploying drones, ballistic missiles and small attack boats to threaten and, in several instances, strike vessels attempting to transit. Commercial traffic through the Strait collapsed by more than 90 per cent within days. QatarEnergy declared force majeure on all LNG exports. The International Energy Agency convened an emergency meeting and released strategic reserves. Brent crude, which had been trading near $72 per barrel on 27 February, the last trading day before the strikes, surged by more than 50 per cent in March alone — one of the largest monthly oil price jumps ever recorded. By mid-March, Brent had touched nearly $120 per barrel.

The magnitude of the disruption was without modern precedent. Roughly 20 per cent of the world’s traded oil and 27 per cent of global maritime petroleum shipments passed through the Strait in normal times. The sudden near-total closure reverberated through every oil-dependent economy on earth, with the shockwave reaching Jamaica within days through global commodity markets, shipping cost indices and financial market risk premiums.

Jamaica at the Fault Line of Global Energy Dependency

Jamaica imports virtually all of the petroleum products it consumes. There is no domestic oil production, no strategic reserve of any meaningful scale, and no pipeline to a neighbouring producer. Every barrel of petrol, diesel and fuel oil that powers Jamaican vehicles, generates electricity, runs agricultural machinery and heats industrial processes must arrive by sea. When global oil prices spike, the full force of that spike transmits to the Jamaican economy with relatively little buffering. The events of March 2026 demonstrated that vulnerability in stark and immediate terms.

The Jamaica Public Service Company, the island’s primary electricity provider, moved quickly to advise customers that fuel surcharges on electricity bills would rise materially in the coming billing cycles, reflecting the sharp increase in the cost of heavy fuel oil used in generation. The JPS’s March announcement — which acknowledged that generation costs had increased sharply due to the “ongoing oil price spike attributable to the Middle East conflict” — was the first formal acknowledgment by a major Jamaican public utility that the war in the Persian Gulf was having direct domestic consequences. It would not be the last.

At the pump, the passthrough was rapid. Regular-grade petrol, which had been retailing at around $151.32 per litre in late February, rose sharply through March as fuel importers adjusted prices to reflect new landed costs. The pattern at bus stops and taxi stands — informal fare increases, longer waits, operators questioning route viability — was a visible street-level symptom of macro-level energy disruption playing out in real time.

Reconstruction Costs Rise as the Oil Shock Bites

The timing of the oil shock was particularly punishing for Jamaica. The island was already in the midst of the most ambitious post-disaster reconstruction programme in its history, rebuilding from Hurricane Melissa’s catastrophic October 2025 landfall. The reconstruction effort — supported by the US$6.7 billion international financing package assembled in December 2025, including contributions from the IMF, World Bank, IDB, CAF and the Caribbean Development Bank — was beginning to gain momentum by February 2026. Hotels were returning to operation. Road and drainage works were advancing. The National Housing Trust and private developers were accelerating residential construction in the most affected parishes.

The oil shock abruptly changed the cost environment for all of this activity. Diesel for construction equipment, cement whose production and transport are energy-intensive, steel imported by sea at higher freight rates, and roofing materials delivered from overseas all became more expensive within weeks of the Hormuz closure. Contractors began approaching public-sector clients with requests for cost variations. Private developers recalculated the viability of projects that had looked financially sound at February’s commodity prices. The BOJ noted in its March monetary policy communications that “construction sector output is being supported by hurricane-related reconstruction demand, but input cost pressures are intensifying.”

The Bank of Jamaica Navigates Competing Pressures

The Bank of Jamaica: Holding the Line

The Bank of Jamaica had cut its policy rate by 25 basis points to 5.50 per cent per annum on 24 February 2026 — just four days before the war began — in a decision that reflected the improving inflation outlook at that time and the need to support economic recovery after Hurricane Melissa. The timing was unfortunate. Within weeks, the central bank was managing an external shock that was pushing inflation in precisely the opposite direction from the trajectory the February rate cut had assumed.

At its March monetary policy meeting, the Committee held the rate at 5.50 per cent. The decision was framed around the supply-driven, externally-originating nature of the inflationary pressure: raising the policy rate would increase borrowing costs for businesses and households struggling to absorb reconstruction expenses and higher energy bills without meaningfully reducing global oil prices. The March CPI data recorded a 2.3 per cent rise in the housing, water, electricity, gas and other fuels component, driven by a 5.1 per cent increase in electricity costs — the most direct domestic expression of the global oil shock arriving in Jamaican homes and businesses.

Global Financial Markets in Crisis Mode

The financial market response to Operation Epic Fury and the Hormuz closure was severe and immediate. Equities fell sharply in the days following the strikes, with energy-importing economies experiencing the steepest declines. Shipping insurance rates for vessels operating anywhere near the Persian Gulf reached levels that made many routes uneconomic. The Baltic Dry Index — a broad indicator of global shipping costs — surged as carriers rerouted around the Cape of Good Hope and passed the additional costs to shippers. Airlines with Gulf routes suspended or diverted services, and jet fuel surcharges rose across the industry.

For Jamaica, the financial market turbulence translated into a widening of sovereign bond spreads, modest weakening of the Jamaican dollar, and a more cautious stance among the foreign investors and development finance institutions whose continued engagement was essential to the reconstruction financing programme. The BOJ’s foreign exchange reserves remained adequate, bolstered by the continued flow of tourist receipts and diaspora remittances, but the risk environment had deteriorated markedly from the relatively benign conditions that had prevailed at the start of the year.

Tourism in the Crossfire

Jamaica’s tourism sector, which had been recovering impressively from Hurricane Melissa with over one million arrivals recorded in the first quarter of 2026, faced a new set of complications from the Iran war. Higher jet fuel costs were feeding into airline pricing, raising the cost of Caribbean holidays and introducing uncertainty into forward bookings. Some European carriers with operations in the Gulf region were diverting capacity and adjusting schedules in ways that affected transatlantic connectivity. There were, however, countervailing factors: with the Middle East broadly off-limits for leisure travel, the Caribbean was attracting visitors who might otherwise have dispersed across a wider range of destinations. Jamaica’s tourism authorities were monitoring booking trends carefully and had initiated additional marketing in the US and UK markets to capitalise on the shift in travel patterns.

Looking Ahead

As this edition is published on 3 April 2026, the news that a ceasefire between the United States and Iran was announced on 7–8 April offers a cautious note of optimism. Whether that ceasefire holds, whether the Strait of Hormuz reopens, and whether oil prices begin their long descent from near-$120 levels are the questions that will define Jamaica’s economic trajectory through the second quarter of 2026. The island enters this period of uncertainty with a reasonably sound macroeconomic foundation — adequate reserves, a functioning central bank, active international support — but with the reconstruction effort from one historic disaster now overlapping with the economic fallout from another. The resilience that carried Jamaica through the immediate aftermath of Hurricane Melissa will be tested again in the months ahead.

Jamaica Homes Global Affairs & Economic Review is published on the third day of each month, analysing the previous calendar month’s international and regional developments and their implications for Jamaica’s economy, housing market, construction sector, tourism industry and diaspora.