Iran War Disruptions May Spark Long-Term Shift Away from Fossil Fuels

The recent Iran war has caused significant disruptions to global crude oil and LNG markets. At least 1 billion barrels of crude oil and refined products have been lost from Middle East producers since the U.S.-Israeli attacks on Iran began on February 28. The closure of the Strait of Hormuz, a vital waterway between Iran and Oman, trapped as much as 20% of global liquefied natural gas supply.

The market has so far managed to absorb the shock, but the impact will be felt in the coming months. The lost barrels will need to be replaced, which could keep crude oil and LNG prices higher for longer. Much depends on how rapidly Middle East producers can ramp up output and exports, as well as whether OPEC+ is able to produce at agreed-upon levels.

However, the bigger question is what long-term impact the Iran war will have. Consumers who can afford to change may switch to electric or hybrid vehicles to insulate themselves from future price shocks. In Australia, for example, EV sales hit a record high in May, with a market share of 20%, and when combined with hybrid vehicles, the share climbed to 46%.