The war in Iran and the effective closure of the Strait of Hormuz have turned a critical artery of the global oil system into a chokepoint, driving Brent crude to a high of $106 a barrel in on March 16.
Goldman Sachs now expects Brent to average above 100 dollars this month and around 85 dollars in April, warning that a prolonged disruption could echo 2008 and briefly send prices toward 150 dollars in a worst‑case scenario.
This is the backdrop for the “Hormuz Effect”: a structural demand shift toward technologies whose total cost of ownership is less exposed to oil.
We have seen this before.
The oil crises of the 1970s pushed buyers toward smaller, more fuel‑efficient cars from Toyota and Honda, permanently reshaping global market share.
Russia’s 2022 invasion of Ukraine triggered a surge in pump prices that coincided with EV advert views jumping roughly 30 per cent in a single week on Auto Trader.
Rising fuel costs do not instantly change the fleet but do shift intent and replacement choices at the margin, especially post early‑adopter phase.
In 2026, EVs are no longer a niche. Battery‑electric vehicles have reached roughly a quarter of new car registrations in the UK, penetrating deep into the early‑majority segment.
Mainstream EV options now start below 20,000 GBP, with models such as the BYD Dolphin Surf (around 17,995 GBP) and Leapmotor T03 (about 15,995 GBP) undercutting many petrol equivalents on upfront price.
When oil shocks push the cost of filling a family petrol car toward or above 100 pounds a tank, the total‑cost‑of‑ownership gap becomes visible, intuitive and politically salient.
Brent has pushed firmly back into three‑digit territory, trading just above 100 dollars per barrel and spiking higher as disruptions around Hormuz tighten the market.
Futures along the curve have risen by double‑digit percentages since late 2025, signalling traders no longer see elevated prices as transient.
After both WTI and Brent shed about 20 percent through 2025, this year’s rally of roughly one‑third year‑to‑date has flipped the narrative to scarcity and volatility.
For automakers, volatility matters more than exact price levels.
Fuel costs swinging 30–50 percent within a year feeds directly into total‑cost‑of‑ownership calculations for ICE vehicles, making EV payoff periods structurally more attractive even if electricity prices remain elevated.
EV economics strengthen even at lower oil prices
The IEA’s Global EV Outlook 2025 estimates EVs already cut oil demand by more than 1.3 million barrels per day in 2024, up 30 per cent from 2023, driven mainly by passenger cars and light vans.
By 2030, EVs could displace over 5 million barrels per day, with China accounting for roughly half as its electric fleet expands.
Even at oil prices as low as 40 dollars per barrel, EVs remain cost‑competitive for many drivers, particularly those who can charge at home.iea.core.windows+1
With Brent well above that threshold, the fuel‑savings case strengthens.
Oil hovering around $100 per barrel compresses the payback period for EVs versus ICE by several years for high‑usage drivers, taxi fleets and delivery operators.
This advantage amplifies in regions where electricity prices stabilise with renewables, while petrol and diesel stay tied to crude benchmarks.finance.yahoo+5
EV adoption is maturing, but not linear
Electric car sales grow from a higher base, but regionally uneven and policy‑sensitive.
The IEA projects electric car sales exceeding 20 million units in 2025, over one‑quarter of all cars sold worldwide, with first‑quarter 2025 sales up 35 per cent year on year.
Under current policies, the EV share surpasses 40 per cent of global new car sales by 2030, with China reaching around 80 per cent.
China dominates, with over 70 per cent of global EV production and about 60 per cent of 2024 registrations, while Europe and the US expand but stagnate where incentives cut.
2026 outlooks show growth shaped by subsidies, charging and sentiment, with buyers gravitating to hybrids and plug‑in hybrids in North America and Europe.
Elevated oil prices reinforce EV demand as a medium‑term tailwind, not an immediate spike.
Hybrids, plug‑in hybrids gain as high‑oil hedges
A striking 2025–26 development is the renaissance of hybrids and range‑extenders where pure EV momentum cooled.
Higher fuel prices plus charging and upfront cost concerns push consumers to full hybrids or plug‑in hybrids as hedges against volatility without full battery commitment.
For automakers, rising oil boosts any tech reducing liquid‑fuel exposure per kilometre.
This means more capital for flexible platforms supporting ICE, hybrid and BEV; extended hybrid lifecycles in the US, Japan and Europe; and stronger plug‑in hybrid cases in premium SUVs.
Over time, high‑fuel economics push toward higher electrification as batteries cheapen and charging deepens.
Auto industry margins, policy and supply chains face a reset
High oil creates risks and opportunities.
It raises mobility costs, depressing car demand in emerging markets where running costs bite hardest.
Automakers face volume and mix pressure amid slower macro and high financing, while investing heavily in electrification.
Yet high oil bolsters policies framing EVs as energy security tools.
Large EV fleets like Norway’s cut road oil demand; 2022’s global EV shift slashed fuel taxes by 9 billion dollars, prompting road‑use charge rethink.
China’s 70 per cent EV production dominance gives leverage as oil pushes electrification.
Western OEMs defend ICE/hybrid profits while catching up on EV platforms amid trade scrutiny; high oil accelerates battery onshoring in North America and Europe.
Energy market volatility will shape the next decade of mobility
Structurally higher oil is a demand signal and execution risk.
Crude’s 50 per cent monthly jump clears 100 dollars, raising ICE running costs immediately while improving EV economics for home/off‑peak chargers.
This pulls demand to EVs mid‑transition, forcing forward volume plans and re‑pricing.express+4
EVs aren’t fully insulated: Iran disruptions drove UK wholesale gas up 50–70 per cent, feeding into public charging (not Ofgem‑capped).
Home chargers (60 per cent of households) stay cheaper per mile; public users face erosion unless supported.
This spike has paradigm ingredients: largest supply disruption per IEA, mature EV tech (250–300 mile ranges, 150 kW charging, sub‑25,000 GBP models), and cost‑conscious mainstream buyers.
When petrol feels like a luxury, EVs become rational.
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