The conflict in the Middle East and the threat of blocking one of the most important fuel transport routes in the world raises concerns about the increase in energy prices. This, along with the US trade war that introduces duties, will hit the global economy. The World Bank is already expecting a slowing of global economic growth to 2.3 % from 2.8 % in 2024 this year. TASR reports this based on the Yahoo report.
After Israel launched on June 13, the air raids on the Iranian military and nuclear infrastructure, oil prices increased by more than 10 %. Markets analyze the impact of the conflict on global oil supply and liquefied natural gas (LNG).
Iran controls the strategic Horse Strait, through which a third of global oil supplies travel by sea and a fifth of LNG supplies. If its blockade occurs, oil prices could fly above $ 100 (€ 86.84) per barrel (159 liters).
Tankers refuse to navigate to pass through
Some analysts argue that Iran also needs an open Hortmian Strait for the ships of its clients – India and China. However, although the strait is not closed, the conflict has already affected energy prices due to the risks. Some oil tankers refuse to go through. At the same time, insurance companies are likely to charge more for vessel insurance.
Particular gas deposits in the region also attract attention. Iran shares the largest natural gas deposit in the world, South Pars, with Qatar. LNG from this region is vital to the rest of the world, including Europe.
Although the European Union (EU) currently has sufficient reserves, its dependence on the global supply of LNG makes it vulnerable to geopolitical shocks as it reduces Russian gas supplies.
Gas prices are rising
European gas prices have already risen significantly due to the risks associated with the Middle East conflict. The reference price of the natural gas on the TTF exchange in the Netherlands reached a three -month maximum, and on Friday (20 June), it approached 41 euros per megawatt -hour.
One of the largest importers of LNG in the EU is France, Spain, Italy, the Netherlands and Belgium. If the conflict affects the supply from Qatar, it will be most affected by Belgium, Italy and Poland, as this Arab country covers 38 to 45 % of their LNG import.
The good news is that the demand for gas is usually the lowest level in Europe this time of year. But hot weather increases the demand for cooling, which could increase the need for electricity in the Union in the coming weeks.
Higher energy prices increase inflation and may have a domino effect on the central bank policy, analysts pointed out. Anything that limits the transit of liquefied natural gas will have “a rapid impact on the EU, especially its production sector”.
