The war involving Iran has sparked a major global energy shock, disrupting oil and gas supplies and pushing prices sharply higher. The crisis has been intensified by the closure of the Strait of Hormuz, a critical transit route for global energy flows, affecting roughly 20% of oil and liquefied natural gas shipments.
As a result, oil prices have surged above 100 dollars per barrel, while gas markets have also experienced strong volatility. The scale of the disruption has been described as one of the most severe in recent history, exposing the fragility of global energy systems.
Governments rethink energy strategies
In response, policymakers around the world are reassessing their energy strategies, with a growing focus on reducing dependence on fossil fuels. Governments are considering a range of measures, including expanding renewable energy, investing in nuclear power, increasing strategic reserves and diversifying supply sources.
“The issue of energy security has never been as acute as now. Until a few weeks ago, markets took Gulf resources for granted. That will not be the case going forward,” said Geoffrey Pyatt, former assistant secretary of state for energy resources under Joe Biden and now senior managing director at U.S. consultancy McLarty Associates.
Asia among the hardest hit regions
Asian economies have been particularly affected by the disruption, given their heavy dependence on Middle Eastern energy supplies.
In Taiwan, economy minister Kung Ming-hsin said the island is considering restarting its last nuclear station, which closed after the main opposition party strongly criticised the government following the start of the Iran conflict for phasing out nuclear power.
Tokyo had already been discussing the restart of reactors idling since the 2011 Fukushima disaster, as Japan looks to reduce the country’s large dependence on energy imports. But politicians have asked Prime Minister Sanae Takaichi to boost the industry since the start of the Iran war.
China has been relatively insulated from the crisis due to its ample emergency oil reserves and high rate of electrification.
Europe revisits nuclear energy
In Europe, rising energy costs have reignited debate over energy policy. Some leaders, as Ursula von der Leyen, have acknowledged that past decisions to reduce reliance on nuclear power may have been a strategic mistake, prompting renewed interest in the sector.
Reducing the share of nuclear in the overall mix of power supplies in Europe over the past 25 years “was a strategic mistake”, von der Leyen said.
At the same time, the shift toward renewable energy continues, though concerns remain about supply chains and dependence on external technologies.
Russian advantages
United States government is focused heavily on ways to tame global energy prices while conducting the war. Consumer price inflation is a key vulnerability for President Donald Trump looking at November’s midterm elections.
As part of efforts to do that, the Trump administration has eased sanctions on Russia to allow other countries to purchase more Russian oil, marking a partial reversal of Washington’s previous efforts to curb Moscow’s oil revenues to fund the war in Ukraine.
“EU politicians are back on the backfoot,” said a gas trader at Vitol, a commodity trading house. “This looks like 2022 all over again.”
The Iran crisis may also bring to reconsider western sanctions on Russian LNG, according to analysts, as the EU and Asian importers struggle from the loss of supply since the onset of the conflict.
“We will not be subjugated to the will of Vladimir Putin and his gas anymore, or geopolitical instability in the Middle East. We’re building new dependencies and new problems inside our energy infrastructure by building dependencies, total dependencies, on Chinese hard and software”, Bart Groothuis, a member of the European Parliament and vice-chair for the delegation for relations with Iran.