How war on Iran changed the global energy sector forever
Conflict will accelerate shift to renewables and search for alternatives to Strait of Hormuz, energy analysts say. Since the United States and Israel launched a
Conflict will accelerate shift to renewables and search for alternatives to Strait of Hormuz, energy analysts say. Since the United States and Israel launched a war on Iran in late February, the global energy sector has undergone major upheaval. Oil prices have swung from levels not seen since the onset of Russia’s full-scale invasion of Ukraine in 2022 to close to where they were before the conflict more than four months ago. Energy suppliers have scrambled to find alternative trade routes amid Iran’s stranglehold over the Strait of Hormuz, through which about one-fifth of global oil and liquefied natural gas (LNG) supplies pass in peacetime. And from Tokyo to New Delhi to London, governments have rolled emergency measures to spare citizens from the worst of the pain inflicted by surging fuel costs. But while ongoing US-Iran negotiations to reach a lasting peace have raised hopes for a return to stability in oil and gas markets, the war has already transformed the global energy landscape in ways that are likely to be long-lasting and even permanent, according to energy experts. “The oil market will never be the same, following this conflict,” Adi Imsirovic, a veteran oil trader who lectures at the University of Oxford, told Al Jazeera. “New pipelines will urgently be built. New security arrangements will be put into place, and the buyers of oil from the region will look elsewhere for diversification,” Imsirovic said. Attacks on commercial vessels in the Strait of Hormuz are widely expected to have a chilling effect on shipping lines that persists long after the war is officially brought to an end.
While Iran agreed to make its “best efforts” to arrange the safe passage of vessels in the strait in the memorandum of understanding (MoU) signed with the US on June 17, Tehran has since then repeatedly claimed the right to control the critical waterway. After hitting a post-war peak of more than 70 transits on June 24, maritime traffic dropped sharply again over the weekend after attacks on two commercial ships that were widely blamed on Iran reignited fears for seafarers’ safety. Facing ongoing threats in the waterway, energy suppliers have sought to ramp up exports on land via Saudi Arabia’s East-West Pipeline, the United Arab Emirates’ Abu Dhabi Crude Oil Pipeline, and the Iraq-Turkiye Crude Oil Pipeline – though the pipelines’ combined capacity falls well short of the approximately 20 million barrels of oil that moved through the strait each day before the war. Dan Marks, a research fellow in energy security at the Royal United Services Institute in London, said he expects there to be “long-term” concern over transits in the strait. ‘“While the current Iranian regime remains in place and at odds with the United States and Israel, there will always be the possibility that tensions will flare and the strait will close,” Marks told Al Jazeera. “The global market has proven able to weather this for a relatively extended period, but it impacts appetite for investment into the region, where production and exports may be disrupted and tourists may be deterred.” June Goh, a Singapore-based senior oil market analyst at Sparta, a commodities data firm, said she anticipates a sustained push by energy producers and consumers alike to reduce their reliance on the strait.
The BriefWire