The world has seen energy shocks before. The oil embargo of 1973. The Iranian Revolution of 1979. The Russian invasion of Ukraine in 2022. Each was devastating in its own right. But none of them compares to what is happening now.
The conflict between Iran, the United States, and Israel is creating the worst energy crisis ever faced by the world, the head of the International Energy Agency said on Tuesday. “This is indeed the biggest crisis in history,” IEA Executive Director Fatih Birol told France Inter radio in an interview broadcast on Tuesday. “The crisis is already huge, if you combine the effects of the petrol crisis and the gas crisis with Russia.”
The Perfect Storm
The war in the Middle East has choked maritime traffic in the Strait of Hormuz, which is a conduit for a fifth of global oil and liquefied natural gas flows. One-fifth of the world’s energy passes through that narrow waterway. When the strait is disrupted, the entire global energy system feels the shock.
But the Iran war is not the only crisis. It has come on top of the effects of Russia’s war with Ukraine, which had already severed Russian gas supplies to Europe. Europe spent two years scrambling for alternative supplies after Russia turned off the taps. That scramble created a new global energy architecture — one that was already strained before the Strait of Hormuz became a battlefield.
Now, two major energy chokepoints are compromised simultaneously. Russian gas is offline. Iranian oil is blockaded. The result, according to the IEA, is a crisis worse than 1973, 1979, and 2022 combined.
Worse Than History
Birol had said earlier this month that he viewed the current situation in global energy markets as worse than previous crises in 1973, 1979, and 2022 combined. That is a striking statement from an agency head who typically chooses words carefully.
The 1973 oil embargo, triggered by the Arab-Israeli war, caused oil prices to quadruple and led to gas station lines across the Western world. The 1979 Iranian Revolution cut off Iranian oil exports and sent prices soaring again. The 2022 Russian invasion of Ukraine caused natural gas prices to spike to record highs, triggering inflation and recession fears across Europe.
The current crisis, in Birol’s assessment, eclipses all of them. The combination of a Middle East war and a European gas crisis, layered on top of years of underinvestment in fossil fuels and the chaotic transition to renewable energy, has created a situation with no historical parallel.
The Response
In March, the IEA agreed to release a record 400 million barrels of oil from strategic stockpiles to combat rising oil prices caused by the US-Israeli war with Iran. That release was unprecedented in scale. It was also insufficient.
Strategic stockpiles are designed for short-term disruptions. They can smooth out a few months of supply interruption. They cannot replace a fifth of global oil and gas flows indefinitely. The IEA knows this. The release was a stopgap, not a solution.
The real solution — a ceasefire, a diplomatic resolution, the reopening of the Strait of Hormuz — remains out of reach. The war continues. The blockade continues. The energy crisis deepens.
What This Means for the World
The IEA’s warning is not abstract. Higher energy prices mean higher inflation. Higher inflation means higher interest rates. Higher interest rates mean slower growth. Slower growth means job losses, business failures, and political instability.
The world has not fully recovered from the inflation spike of 2022. Central banks are still wrestling with the aftermath of post-pandemic price surges. Another energy shock, layered on top of the existing stresses, could tip major economies into recession.
Birol’s assessment is that the world is already there. The biggest energy crisis in history is not coming. It is here.
The Bottom Line
The head of the International Energy Agency, Fatih Birol, said Tuesday that the conflict between Iran, the United States, and Israel is creating the worst energy crisis the world has ever faced. He described it as worse than the 1973 oil embargo, the 1979 Iranian Revolution, and the 2022 Russian gas crisis combined.
The war has choked traffic in the Strait of Hormuz, which carries a fifth of global oil and LNG. The crisis is layered on top of existing disruptions from Russia’s war with Ukraine. The IEA has already released a record 400 million barrels of oil from strategic stockpiles, but the underlying problem — the closure of the strait — remains unresolved.
