With news of a two-week truce, crude oil price has slipped below $100 a barrel. Even though the Strait of Hormuz has not reopened yet and despite U.S. threats to block Iranian tankers and those of its supporters, markets still seem to be holding out hope that this conflict might be winding down.

What could rattle the oil market again?

If the negotiations between parties fall apart and tensions flare up again, Iran might not just target energy infrastructure in neighboring countries but try to block the Bab el Mandeb Strait in the Red Sea. In that case, instead of losing 8–9 million barrels per day in oil flows, the disruption could reach as much as 25 million barrels per day.

And it is not just about oil and gas. The Strait of Hormuz and the Bab el Mandeb are also key routes for a wide range of essential commodities, including fertilizers, sulfuric acid, and aluminum. So any further escalation would not just push up energy prices, it could ripple across the global economy and eventually move markets sharply.

If things simply stay as they are, with neither real escalation nor meaningful improvement, the damage starts to build over time. Oil-importing countries are already feeling the strain. China, for example, is beginning to come under pressure, even though it still has sizable reserves.

In particular, in March, China’s exports grew by just 2.5% year on year, well below the expected 8%. High energy costs are squeezing economies that rely on imported oil and gas, which in turn weakens their demand for foreign goods.

As for the U.S., one of the main spillover effects of the conflict has been rising inflation. Driven by higher energy prices, consumer prices increased by 0.9% month on month and 3.3% year on year in March. Inflation expectations are also climbing. According to the University of Michigan, one-year expectations rose from 3.8% to 4.8%, while five-year expectations edged up from 3.2% to 3.4%. At the same time, U.S. consumer sentiment has fallen sharply to a historic low of 47.6.

If the crisis is not resolved soon, the Federal Reserve could take a more hawkish stance, and any interest rate cuts this year may have to be put on hold.

For now, though, markets are still holding on to hope, encouraged by optimistic headlines around the negotiations.