New study highlights the prospect of a global energy shock amid Iran war

TRENDS Research & Advisory has published a new study highlighting the risks posed by the intensifying military tensions among the United States, Israel, and Iran.

The report cautions that this escalation could trigger a significant upheaval in global energy markets, potentially leading to price surges, disruptions in international trade, and heightened financial market volatility.

A report released by the Trends Virtual Office in Italy, titled “The Iran War and the Prospect of a Global Energy Shock,” highlights the strategic importance of the Arabian Gulf region within the global energy framework. It stresses that any military conflict in this area would rapidly impact the international economy.

The study highlighted that the ongoing escalation has already triggered a sharp increase in oil and gas prices, with Brent crude surpassing $100 per barrel—a significant jump from the pre-conflict projections of $60-$65 per barrel under typical supply and demand conditions.

Additionally, it emphasized that military operations have nearly halted shipping through the Strait of Hormuz, a critical passageway responsible for moving roughly 20% of the global oil and liquefied natural gas (LNG) trade.

This disruption has intensified the strain on energy markets worldwide. On top of this, attacks targeting energy facilities in Qatar and Saudi Arabia have further amplified concerns regarding the security and stability of the region's energy infrastructure.

The study revealed that an extended disruption of exports through the Strait of Hormuz could cause oil storage facilities to fill up within weeks, compelling certain producing nations to curtail production. This scenario would heighten strain on global oil prices and might lead to a prolonged energy crisis.

It also highlighted that Asian countries are particularly at risk due to their significant dependence on oil and gas imports originating from the Gulf and passing through the Strait of Hormuz.

Over 80% of oil and liquefied natural gas exports that transit the strait are directed toward Asia, with China and India among the most reliant on these critical energy supplies.

The study highlighted the potential ramifications of a halt in Qatar's liquefied natural gas (LNG) production, which represents nearly 20% of the worldwide seaborne gas trade.

Such an interruption could severely disrupt gas markets across Asia and Europe, particularly given the limited viable alternatives available to compensate for this loss.

Additionally, the study emphasized that sustained oil prices exceeding $100 per barrel could ripple through the global economy, driving up transportation, electricity, and industrial expenses. These rising costs would likely result in higher household energy bills and a decline in industrial output, exacerbating economic pressures.

The researchers concluded that while measures like boosting production through major oil alliances or leveraging strategic reserves might provide short-term relief, they are unlikely to fully offset the extensive supply disruptions caused by prolonged disturbances in the Strait of Hormuz.

This scenario would significantly heighten the risk of re-emerging inflation and contribute to a slowdown in overall global economic growth.