For decades, the worst-case scenario for the global energy market was a remote hypothesis: that a conflict would close the narrow sea lane that connects the enormous oil reserves of the Persian Gulf with the rest of the world. Today, that scenario has become reality.
Before the outbreak of the war with Iran, approximately a third of the oil transported by sea on the planet and about a fifth of the liquefied natural gas (LNG). He has caused an earthquake in the energy markets.
The immediate result has been extreme oil price volatility, with movements of more than 20% in a single day during the last week. At the same time, several Gulf producers have had to reduce their production as they cannot transport all their crude to international markets or store it indefinitely.
For Gregory Brew, a historian specializing in Iran and senior analyst at the Eurasia Group, the magnitude of the current shock is unprecedented. As he explains in an interview in the , “In terms of barrels removed from the market, this is the biggest supply shock in history”.
An impact greater than the 1979 oil shock
The closest historical comparison is the energy crisis of 1979, also caused by the Iranian revolution and which doubled the price of oil.
However, Brew maintains that the current situation is even more serious. “We are talking about some 20 million barrels a day that cannot flow to the market for more than a week, approximately double the interruption recorded then.
That volume has disconcerted investors. For years, markets viewed the closure of the Strait of Hormuz as a “tail risk” – an extreme but unlikely threat. The reason was simple: Iran also depends economically on that maritime passage.
But the conflict has changed the rules. Now traders doubt how long the crisis will last and markets react with sharp price changes.
The energy crisis does not only affect oil
Rising gasoline prices are the most visible impact, but Brew warns that More important economic effects will occur in other fuels and raw materials. As they say, it will go from the tank to fertilizers, and from there to food and other products, because almost everything is derived from or depends on oil.
One of the most affected is diesel, key for industry and transportation. When its price rises, activities such as construction, industrial production or logistics become more expensive.
Jet fuel prices have also skyrocketed, which is expected to translate into more expensive tickets.
But the problem doesn’t end there. The closure of the strait is also affecting liquefied natural gas: Around 20% of the world’s LNG supply cannot reach the market, especially from Qatar.
This directly hits regions highly dependent on this supply, such as Europe, South Korea or Taiwan. Europe, furthermore, enters this crisis with relatively low gas reserves after the winter.
The Persian Gulf is also a major exporter of fertilizers and agricultural products, which could lead to higher food costs, especially in South Asian countries.
USA, better positioned… but not immune
The US starts from a relatively stronger position than other economies. It is the largest oil producer in the world and it barely imports crude oil from the Persian Gulf. According to Brew, the country consumes around 20 million barrels per dayof which only about 500,000 come from that region. Furthermore, it is practically self-sufficient in natural gas.
However, that does not mean that the US economy will emerge unscathed. The highest energy prices benefit producing regions such as Texas, North Dakota or Pennsylvaniabut they harm other economic sectors that depend on cheap energy, such as the technology industry or data centers linked to the rise of artificial intelligence.
The main risk of the oil market is no longer Iran
For Brew, the biggest change in the global energy market is geopolitical. For decades, the main focus of risk was OPEC, Russia or Iran itself. But now the analyst believes that the greatest source of volatility is something else. “The main disruptive force driving risk in the oil market is no longer Iran or OPEC. It is the United States”he maintains in the same interview.
As he explains, Washington’s current strategy has increased pressure on the global energy system. In recent months, The US has supported attacks on Russian oil infrastructurehas imposed sanctions on Moscow’s energy sector, has tightened pressure and has finally entered into direct conflict with Iran.
All of this has been done under the premise that the global energy market could absorb these blows without major consequences. But the current situation seems to prove the opposite.
For Brew, the closure of the Strait of Hormuz has completely changed the narrative of the oil market. “The idea that the market was well supplied is over”he concludes. “The most likely thing is that we will enter a prolonged period of high energy prices and a much tighter market, which could last until 2027,” he adds.
