Strait of Hormuz Blockade Could Trigger ‘Largest Energy Crisis’ — IEA

The Executive Director of the International Energy Agency (IEA), Fatih Birol, has warned that Europe may have just six weeks of jet fuel remaining as the airline industry grapples with supply disruptions caused by the Middle East conflict.

Birol cautioned that flight cancellations could begin “soon” if oil supplies continue to be blocked due to the Iran war. He warned that a blockade of the Strait of Hormuz could trigger the “largest energy crisis” ever experienced.

He said the disruption would have far-reaching implications for the global economy, noting that prolonged supply constraints could worsen inflation and slow economic growth.

According to Birol, the impact would be felt across energy markets, with higher petrol, gas, and electricity prices, and some regions likely to be hit harder than others.

“In the past, there was a group called ‘Dire Straits.’ It’s a dire strait now, and it is going to have major implications for the global economy. And the longer it goes, the worse it will be for economic growth and inflation around the world,” he told The Associated Press on Friday.

“The impact will be higher petrol (gasoline) prices, higher gas prices, and higher electricity prices,” Birol said, speaking from his Paris office overlooking the Eiffel Tower.

He added that the economic pain would be unevenly distributed. “The countries that will suffer the most will not be those whose voices are heard the most. It will mainly be developing countries—poorer nations in Asia, Africa, and Latin America,” said the Turkish economist and energy expert, who has led the IEA since 2015.

However, without a resolution to the Iran war that permanently reopens the Strait of Hormuz, “everybody is going to suffer,” he said.

“Some countries may be richer than others. Some countries may have more energy resources than others, but no country is immune to this crisis,” Birol added.

Nearly 20% of the world’s traded oil passes through the Strait of Hormuz in peacetime. Birol warned that failure to reopen the waterway within weeks could worsen the impact on global energy supplies.

“In Europe, we have maybe six weeks or so of jet fuel left,” he said. “If we are not able to open the Strait of Hormuz, we will soon hear news that some flights from city A to city B might be canceled due to a lack of jet fuel.”

He added: “Many government leaders tell me that if Hormuz is not open until the end of May, many countries—starting with weaker economies—are going to face huge challenges, ranging from high inflation to slow growth or even recession in some cases.”

Birol also criticized the so-called “toll booth” system reportedly applied by Iran to some ships passing through the strait, allowing transit for a fee. He warned that normalizing such a system could set a dangerous precedent for other strategic waterways, including the Malacca Strait in Asia.

“If we change it once, it may be difficult to reverse,” he said. “It will be difficult to apply a toll system here but not elsewhere.”

“I would like to see oil flow unconditionally from point A to point B,” he added.

Birol noted that more than 110 oil tankers and over 15 liquefied natural gas carriers are currently waiting in the Persian Gulf and could help ease the crisis if allowed to pass through the Strait of Hormuz. However, he stressed that this would not be sufficient to resolve the situation.

Even in the event of a peace agreement, damage to energy infrastructure could delay recovery. “Over 80 key assets in the region have been damaged, and more than one-third are severely or very severely affected,” he said.

“It would be extremely optimistic to expect a rapid recovery,” Birol added. “It will take time—gradually, up to two years—to return to pre-war production levels.”