IEA chief Fatih Birol: Worst energy crisis in history and a shock without historical precedent – ​​oil price approaching record high

The paradoxical end of the fossil fuel era: How the Middle East shock is fueling the energy transition

Food, heating, gasoline: How the closure of a single strait threatens our daily lives

It's a nightmare scenario without historical precedent: The widespread blockade of the Strait of Hormuz plunged the global economy into the most severe energy crisis of all time in the spring of 2026. With a sudden loss of eleven million barrels of oil per day and massive disruptions in global liquefied natural gas (LNG) supplies, the upheaval far surpasses the legendary oil shocks of the 1970s. As oil prices rapidly climb to unimaginable record highs and Europe's gas storage facilities are on the verge of collapse, the International Energy Agency (IEA) warns of catastrophic consequences: looming stagflation, skyrocketing food prices, and existential hardship in emerging economies paint a picture of a world on the brink. But the blockade in the Persian Gulf also forces a radical rethink – and could, paradoxically, become an unprecedented catalyst for the end of the fossil fuel era. A profound look at a crisis that will forever alter the global balance of power.

When a single strait plunges the global economy into the abyss

Fatih Birol, the Executive Director of the International Energy Agency (IEA), doesn't use particularly dramatic language when describing the current situation – he simply describes the reality: The oil and gas crisis triggered by Iran's blockade of the Strait of Hormuz is "more severe than the crises of 1973, 1979, and 2022 combined." Never before has the world experienced an energy supply disruption of this magnitude, Birol told the French newspaper Le Figaro. This assessment is not without merit: While the first oil shock in 1973 and the second in 1979 together caused a shortfall of around ten million barrels per day, the daily losses from the current crisis are estimated at eleven million barrels. Added to this is a drop in liquefied natural gas (LNG) of 140 billion cubic meters, almost double the losses during the Russo-Ukraine War.

The Strait of Hormuz is the only sea route connecting the Persian Gulf to the open ocean. At its narrowest point, it is only 34 kilometers wide. In normal times, around 13 million barrels of crude oil flowed through this bottleneck daily – according to Kpler data, about 31 percent of all global seaborne oil shipments. Since the US and Israel launched joint military strikes against Iran on February 28, 2026, Tehran has effectively brought shipping to a standstill. The Revolutionary Guard issued warnings via VHF radio that no ships were to pass through the strait. Major shipping companies such as Maersk, MSC, Hapag-Lloyd, and CMA CGM immediately suspended their transits; insurance companies withdrew their war risk coverage. At times, around 150 ships were anchored. The world's energy supply had lost one of its most critical arteries virtually overnight.

The spark in the Persian Gulf – How the escalation came about

The events surrounding the Iran conflict were not a surprise, but rather the result of a long spiral of escalation. As early as June 2025, Israeli attacks on Iranian nuclear facilities led investors and energy markets to reassess Hormuz. Brent crude oil climbed by ten percent during that period to over $77 per barrel. The decisive break came on February 28, 2026, when US and Israeli forces launched a joint offensive against Iran, killing Iranian Supreme Leader Ayatollah Ali Khamenei in the process. Tehran responded with what it had threatened to do for decades: close the Strait of Hormuz.

In the following weeks, the conflict escalated further. Iran retaliated against energy infrastructure in the region: parts of the South Pars gas field and the Asaluyeh processing hub were attacked. A drone struck the SAMREF refinery in Saudi Arabia. Bahrain's energy company, Bapco Energies, invoked force majeure after an attack on its refinery with a 380,000-barrel-per-day capacity. Israel confirmed attacks on the South Pars gas complex, Iran's largest petrochemical site. The Middle East conflict had expanded into a full-blown energy war, the consequences of which would affect the entire global economy.

President Donald Trump responded with a typical mix of ultimatum and threat: He demanded via TruthSocial that Iran open the Strait of Hormuz within 48 hours, otherwise he would bomb Iranian power plants, "starting with the biggest one." Tehran replied that if the US threats were carried out, the Strait of Hormuz would remain completely closed until the destroyed power plants were rebuilt. Iran rejected a ceasefire, insisting on permanent guarantees of an end to the war—a virtually impossible condition to meet. Thus, the crisis remained unresolved by early April 2026, while the economic disruption worsened daily.

Oil at over $100 – The price spiral and its logic

Before the outbreak of war in February 2026, the world faced a different situation: Brent crude oil was trading at around $65 a barrel. Analysts had even predicted lower prices for 2026, as increased OPEC+ supply and weak demand were putting downward pressure on prices. The attack on Iran and the subsequent closure of the Strait of Hormuz swept all these forecasts aside. Within a single trading session, the price of crude oil rose by almost 29 percent – ​​the largest daily increase since April 2020. Brent broke through the $120 mark. Analyst Rory Johnston of Commodity Context estimated at the time that the price would rise by two to three dollars daily as long as the strait remained closed.

Analysts at Wood Mackenzie and Goldman Sachs are now seriously discussing the possibility of Brent crude oil prices reaching $150, or even $200, per barrel. Wandana Hari of the research firm Vanda Insights noted that Middle Eastern benchmarks like Oman and Dubai had already surpassed the $150 mark. TotalEnergies CEO Patrick Pouyanné issued a stark warning at the CERAWeek conference in Houston: Should the crisis last longer than three to four months, it will become a systemic problem for the global economy. The current price increase of 40 percent in the first month of the war alone exposes the structural weakness of the global energy system: There is simply no scalable alternative that can replace 11 million lost barrels per day in the short term.

The EIA (US Energy Information Administration) forecasts that Brent crude will remain above $95 in the coming months before potentially falling below $80 in the third quarter if the situation eases. However, this forecast is based on the assumption of a relatively short conflict period. The longer Hormuz remains blocked, the more likely the worst-case scenario becomes: oil prices well above $100, resulting in a global recession.

The IEA responds with record approvals – is that enough?

The first institutional response to the crisis was a coordinated release of strategic oil reserves by the 32 IEA member countries. They unanimously agreed to release approximately 400 million barrels of crude oil onto the market—the largest such measure in the history of the agency, which was founded in 1974. This more than doubles the release of 182 million barrels following Russia's invasion of Ukraine in 2022. The UK made 13.5 million barrels available, while Japan announced it would release 80 million barrels. The Japanese government was particularly exposed: Japan obtains around 95 percent of its oil from the Middle East, with about 70 percent of that coming through the Strait of Hormuz.

But Al Jazeera had already raised the crucial question: Is this release sufficient? The experts' answer was sobering. The 400 million barrels reduce the reserves of IEA members by a mere 20 percent. Birol himself admitted that while the release might alleviate economic pain, it could not provide a fundamental solution – the reopening of the Strait of Hormuz remains essential. At the same time, European countries and Japan jointly pressed for diplomatic solutions: Great Britain, France, Germany, Italy, the Netherlands, and Japan declared in a joint statement their willingness to contribute appropriate efforts to ensure safe passage through the strait.

In parallel, Birol intensified his demands: governments should immediately reduce oil consumption – through mandatory work-from-home orders, lower speed limits on highways, cheaper public transport, and a ban on private jets. These measures sound like a war economy, which in a certain sense they are: the IEA chief described the necessary mobilization as comparable to pandemic-related restrictions. Birol also warned that if oil and gas fields in the region were permanently damaged, they would need more than six months to fully resume production after the strait was reopened. The crisis thus has a long-term dimension that even a swift end to the conflict would not completely resolve.

Qatar and the LNG disaster – Europe's gas supply at its limit

Besides crude oil, it is primarily liquefied natural gas (LNG) that has brought European energy markets to a standstill. Qatar, the world's largest LNG exporter, accounting for around 20 percent of global LNG supply, declared force majeure on March 4, 2026, affecting all its gas exports. The state-owned QatarEnergy halted gas liquefaction at the Ras Laffan complex after an Iranian missile strike reduced export capacity by approximately 17 percent. Even if the conflict were to end tomorrow, it would take at least two weeks to restart production and another two weeks to reach full capacity. QatarEnergy extended the force majeure declaration until mid-June 2026.

The consequences for Europe were immediate and painful. The price of natural gas on the European reference exchange TTF skyrocketed from $10.72 per MMBtu on February 25 to $16.70 on March 4 – an increase of 55 percent in less than a week. Overall, European gas prices rose by 60 percent since the start of the war. This figure is all the more alarming given that storage facilities in France were only 22 percent full at that time, and in Germany only 21 percent. The Netherlands had the lowest level at 11 percent. Germany and the other key countries were on the verge of entering a critical supply window. These countries could not obtain replacement LNG directly, as already dispatched Atlantic cargoes from Nigeria and the USA had been diverted to Asia.

Britain, barely recovered from the Russian gas crisis, was once again confronted with dramatically rising wholesale prices. Analysts warned that household energy bills would climb significantly. The British Food and Drink Federation predicted a rise in food prices of at least nine percent by the end of 2026 – compared to an earlier pre-war estimate of 3.2 percent. Europe thus faces a double burden: rising energy costs, which directly impact businesses and households, and indirect inflationary effects from higher transport, production, and food costs.

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Stagflation and the threat of recession – The economic policy dilemma

The macroeconomic implications of the crisis are profound and give the situation a qualitatively different dimension than previous energy shocks. Economists at the ifo Institute for Economic Research in Munich and international institutes are openly speaking of stagflation – that rare and particularly difficult-to-combat condition in which rising inflation and stagnant or negative growth occur simultaneously. On March 19, the European Central Bank left its key interest rate unchanged at 2.0 percent – ​​the sixth consecutive pause – but revised its inflation forecast for 2026 upward from 1.9 to 2.6 percent and lowered its growth expectation from 1.2 to 0.9 percent. This is a classic stagflation scenario: The ECB can neither lower interest rates to support growth nor raise them without further burdening the economy.

Goldman Sachs has developed three scenarios: In the baseline scenario, the disruption lasts around six weeks, the price of crude oil rises to $120 and then falls back to $80 to $100, without lasting infrastructure damage. In the more pessimistic scenario, oil and gas facilities remain permanently damaged; crude oil could climb to $150 and natural gas could surge to €120 per MWh – a fourfold increase compared to pre-war levels. Wood Mackenzie, on the other hand, no longer considers a Brent price of $200 to be beyond the realm of possibility. S&P Global warned that encouraging growth signals from the beginning of the year in the eurozone have been wiped out by galloping energy prices, disrupted supply chains, and volatility in the financial markets.

Another problem is the monetary policy framework. Higher oil prices and exchange rate depreciations create a negative terms-of-trade shock for many countries, making it more difficult to service foreign debt and depleting foreign exchange reserves. Egypt, for example, may have to refinance more than four billion US dollars worth of Eurobonds next year; Jordan and Pakistan around one billion each. For heavily indebted emerging economies, the energy shock could thus escalate directly into a debt crisis – a domino effect that would be even broader than the immediate effects of energy prices suggest.

Developing countries and the silent catastrophe

The most serious consequences are borne not by the wealthy industrialized world, but by the Global South – and to an extent that is often downplayed in Western reporting. IEA chief Birol explicitly emphasized that developing countries are particularly affected: They are suffering from higher oil and gas prices, rising food costs, and accelerated inflation. The Strait of Hormuz is not only an oil and gas route, but also the most important hub for the global fertilizer trade. Around a third of the world's traded fertilizers – including the majority of globally traded urea and phosphate – pass through this strait. Gulf states such as Saudi Arabia, Qatar, and the UAE are the main suppliers of ammonia and urea.

Bank of America estimated that the conflict was affecting 65 to 70 percent of the global urea supply. According to Bank of America, fertilizer prices have already risen by 30 to 40 percent. The Kiel Institute for the World Economy (IfW) modeled various scenarios: If the road were to close completely, food prices in Sri Lanka, Pakistan, and India could rise by 10 to 15 percent. FAO data shows that global food prices had already risen by 2.4 percent in March 2026 – for the second consecutive month. Particularly hard hit were sugar (+7%), vegetable oils (+5%), and wheat (+4.3%). The UN estimates that if the crisis continues, global fertilizer prices will be 15 to 20 percent higher in the first half of 2026 than in the same period of the previous year.

For countries where food and energy together account for 30 to 50 percent of the inflation basket—compared to less than 25 percent in developed economies—this is not a statistical abstraction, but an existential crisis. Moody's Managing Director Marie Diron warned that this leaves many emerging economies extremely vulnerable to external price shocks. Countries like Egypt, Pakistan, and parts of sub-Saharan Africa are facing a simultaneous energy, food, and debt crisis. The European Bank for Reconstruction and Development (EBRD) assessed the situation as a potentially serious setback to the stabilization progress that many emerging economies had made following the COVID-19 pandemic and the war in Ukraine.

Asia's Energy Community of Fate – Japan, Korea, China and India Facing Headwinds

No continent is more severely and directly affected by the crisis than Asia. More than 80 percent of the crude oil and LNG flowing through the Strait of Hormuz is destined for Asian customers. Japan is the most vulnerable of the major countries: almost 95 percent of its oil imports come from the Middle East, and around 70 percent of that is shipped through the Strait of Hormuz. While Japanese Prime Minister Sanae Takaichi assured the public that her country has sufficient strategic reserves for approximately 254 days, these buffers cannot permanently replace structural dependencies. Japanese importers are currently negotiating alternative supplies from Kazakhstan, Azerbaijan, North and South America, and Africa.

Iran attempted to exploit the situation tactically: Tehran declared it would allow Japanese ships to pass through the Strait of Hormuz – a clear attempt to drive a wedge into the Western alliance and decouple Japan's position from that of the US. The situation is similarly threatening for South Korea, which sources 68 percent of its oil imports from the region, and for India, which is 53 percent dependent on the Middle East. China, with a dependency of around 15 percent, is significantly more robustly positioned against the direct Hormuz risk, giving the country geopolitical leeway – an asymmetry that complicates strategic debates in Washington and Brussels. According to shipping data, Thailand and Pakistan have already begun rationing and stockpiling fuel.

Bloomberg reported, after speaking with over three dozen oil and gas traders, executives, brokers, shipping companies, and consultants, that the unanimous consensus was that the world has not yet fully grasped the gravity of the situation. All drew parallels to the 1970s and warned that the shutdown threatened to trigger an even worse crisis. The fuel shortage in Asia would soon spread westward, and Europe faced diesel shortages in the coming weeks.

The energy transition as an unplanned winner of the crisis

As paradoxical as it sounds, the most severe energy supply crisis in history may well provide the strongest structural impetus for moving away from the fossil fuel age. Birol himself stated that one of the responses to the crisis would be an acceleration of the use of renewable energies – not only to reduce emissions, but also because they represent a domestic energy source and thus reduce geopolitical vulnerability. By 2025, clean energy was already dominating the expansion of new electricity generation capacity, with renewable energies accounting for 85 percent of all new power plant capacity. Analysts at the global energy think tank Ember aptly put it: The Iran crisis is accelerating the transition to renewable energies and electrification; rising fossil fuel prices are making already cheaper electrical technologies even more attractive.

At the same time, nuclear power is experiencing a renaissance that would have seemed unthinkable just a short time ago. Europe announced new financial guarantees for nuclear power, effectively reversing decades of policy of phasing it out. In Taiwan, where the ruling Democratic Progressive Party had officially been striving for a nuclear-free homeland since 2016, President Lai Ching-te announced plans to restart two decommissioned reactors. Birol drew a historical parallel: Just as nuclear power plants were built and trade routes were altered after the oil shocks of the 1970s, the response to the Iran-Iraq War will also accelerate the transition to renewable energies and usher in a new boom phase for nuclear power.

At the same time, experts warn against creating new dependencies. A rapidly accelerating shift away from fossil fuels toward renewable energies could create a structural dependency on China, which dominates the value chains for solar and wind technologies as well as battery storage. Europe would then face a dilemma similar to that with Russian gas: strategic autonomy as an illusion. Furthermore, short-term reality shows that coal—the real loser in the climate crisis—is temporarily gaining momentum as an immediate winner, since countries are mobilizing every available energy source.

Strategic lessons from the worst supply disruption in history

The 2026 crisis brutally exposed the fundamental vulnerability of the global economy due to its concentration on a single geographical bottleneck. The Strait of Hormuz is not an abstract geopolitical variable; it is the lifeblood of modern industrial societies. It would be intellectually dishonest to frame this crisis primarily as a military or geopolitical one. Above all, it is a structural failure—a collective failure of the international community to have seriously addressed the enormous vulnerabilities of its energy supply chains.

Historical analogies can only offer limited help. The 1973 oil shock was triggered by an oil embargo imposed by the Arab OPEC states, which was deliberately used as a political instrument and lifted again after a few months. The 1979 shock was a consequence of the Iranian Revolution and the outbreak of the Iran-Iraq War. Together, these two crises caused a shortfall of ten million barrels per day. The 2026 crisis surpasses this in volume and is also linked to the loss of 140 billion cubic meters of gas – an energy source that played a far less significant role globally in the 1970s. What remains is the imperative to fundamentally rethink energy resilience: through accelerated diversification of supply chains, expansion of alternative transport corridors, a massive increase in strategic reserves, and the consistent promotion of domestic and renewable energy sources – regardless of how the immediate crisis in the Gulf ultimately plays out.

Fatih Birol is right: The world has never experienced a disruption of this magnitude. But the most frightening thing about it is not the crisis itself – it is the fact that it was known to be possible and yet it happened.

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