Hormuz Crisis Escalates: Experts Warn of Systemic Global Consequences
The Strait of Hormuz oil shock has reached its one-month mark, with prices surging and growth forecasts being cut worldwide. The energy industry is warning that the crisis is only beginning, predicting shortages will spread from Asia to Europe in the coming weeks.
According to over three dozen traders, executives, brokers, shippers, and advisers, the world has yet to grasp the severity of the situation. Many drew parallels with the 1970s oil shock, warning a prolonged closure would threaten an even bigger crisis.
Patrick Pouyanne, CEO of TotalEnergies SE, stated at CERAWeek that if the crisis lasts more than three or four months, it will become a systemic problem for the world. The market has been shielded by supply buffers, but they are being depleted, leaving a roughly 9 million-barrel shortfall.
The closure of the Strait is reducing global oil flows by around 11 million barrels a day, with lower demand in Asia helping to alleviate some of the gap. However, further interventions may be limited, and experts warn that once emergency stockpiles are depleted, there's no clear solution to prevent sharp price increases.
The situation is particularly dire for liquefied natural gas (LNG), which has no alternative routes and few strategic stockpiles to cushion the shortfall. The US government officials and Wall Street analysts are starting to consider the prospect that oil prices might surge to an unprecedented $200 a barrel.