If the war in Iran does not end soon, the world could enter the strongest energy crisis since the 1970s
The global economy could face a very serious energy crisis, similar to the one that occurred in the 1970s. The cause is the war in the Middle East and the closure of the Strait of Hormuz — one of the main routes for oil export. If the situation does not normalize quickly, the world could lose about 10% of all oil production, writes The Wall Street Journal.
Strait of Hormuz and Persian Gulf countries. Map: Bedirhan Demirel/Anadolu via Getty Images
According to analysts, if oil transportation does not resume in the coming days, production in the Middle East could decrease by more than 4 million barrels per day. If the crisis continues until the end of the month, the drop could reach 9 million barrels per day, which is almost one-tenth of global consumption. Experts note that throughout history, the Strait of Hormuz has never been completely closed, so the current situation appears unprecedented.
Iraq was the first to cut production, as it lacked sufficient oil storage. Following this, Kuwait, the United Arab Emirates, and Saudi Arabia took similar steps. As a result, a significant portion of the oil usually supplied to the global market is now not reaching buyers.
Initially, the oil market reacted relatively calmly: oil prices held at around $80-85 per barrel, as a quick resolution to the conflict was expected. But when it became clear that the strait blockade could continue, prices sharply increased—almost to $120 per barrel—before slightly decreasing to around $100.
The most vulnerable could be countries in Asia and Europe, which are highly dependent on oil imports from the Middle East. For example, Asian states receive about 60% of their imported oil from there, and Japan approximately 95%. Replacing these supplies is very difficult, as transporting oil from other regions takes significantly longer, and oil refineries are often adapted to specific crude oil grades.
Some countries are trying to bypass the strait. Saudi Arabia and the UAE have oil pipelines that divert some exports to other seas, but their capacity is insufficient to fully compensate for the losses.
Experts believe that even minor attacks on tankers could long impede shipping in this region. If the crisis drags on for several weeks, it could significantly impact the entire global economy and lead to increased inflation and slowed economic growth.
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