How the World Averted an Energy Catastrophe After Iran's War Closed the Strait of Hormuz

The Impact of Iran's War on the Global Oil Market

According to ХВИЛЯ: The conflict in Iran has resulted in the closure of the Strait of Hormuz, triggering the largest oil supply disruption in history and a sharp spike in prices. This strategic waterway is a vital artery, typically handling 20% of the world's seaborne oil and 20% of global liquefied natural gas (LNG). Under normal conditions, up to 90 tankers might be present in the strait simultaneously, but current traffic has dwindled to almost nothing.

Since the crisis began, the price of Brent crude has surged by 50%, reaching approximately $90 per barrel. Spot LNG prices in Asia have nearly doubled, while European gas prices have risen by about 50%. Last year, over 80% of the oil and 90% of the LNG from the Persian Gulf was destined for Asian markets. It's worth noting, however, that Iran's own oil exports account for less than 2% of global supply, suggesting the direct impact of its output loss on the world market may be contained.

The Resilience of the Global Energy System

The epicenter of the crisis has shifted eastward. While oil worker strikes in Iran in the autumn of 1978 were a pivotal element of protests then, today's global energy landscape shows greater resilience due to structural shifts in supply, notably the U.S. shale revolution. Energy expert Daniel Yergin observes:

'The global system has proven far more resilient than in past crises-largely thanks to the U.S. shale revolution.' Daniel Yergin

He further adds: 'Yet this crisis is unfolding in a world where the global oil and gas system is more resilient and diversified than it has been in decades.'

Additional infrastructure developments have bolstered this resilience. Saudi Arabia has built an extensive east-west pipeline network, and Abu Dhabi has constructed a pipeline that bypasses the Strait of Hormuz entirely. The United States remains the world's largest oil producer and the top exporter of LNG, underscoring its critical role in stabilizing energy markets. This global diversification of supply sources has been a key factor in mitigating the shock.

'Russia, despite sanctions and price caps, remains a major oil exporter. But new American capacity proved critical when Vladimir Putin attempted to wield the 'energy weapon'... The attempt failed.' Daniel Yergin

Consequently, despite the severity of the situation, the global energy system has demonstrated a remarkable capacity to endure, allowing nations to adapt to new market realities. While this crisis has caused significant short-term supply disruptions, it ultimately highlights the paramount importance of diversifying energy sources and strengthening infrastructure to ensure energy security in the face of global challenges.