Energy crisis

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The waging of war on Iran by the US and Israel on 28 February brought the Persian Gulf back to the fore of financial market concerns. The military escalation triggered a supply shock due to the closing of the Hormuz strait, through which roughly one-fifth of the global supply of oil and gas transits.

After the killing of Ali Khamenei, Iran’s retaliation hit maritime shipping, with attacks against cargo ships and the mining of some stretches of the strait, making regular navigation impossible and boosting insurance costs to unsustainable levels. At the same time, important energy infrastructures were also affected both in countries allied with the United States and in Iran, resulting in an estimated reduction in oil supplies by around 8-9 million barrels per day (mb/d) on a total of 20-21, on top of which Qatar gas supplies have been fully brought to a standstill.

Oil prices rapidly climbed back above the USD 100 per barrel mark, following the reversal of the demand-supply balance, that in early 2026 was showing a surplus of 2-3 mb/d, as opposed to an estimated deficit of between four and six mb/d. Under this scenario, based on a simple comparison of supply and demand, oil prices could potentially soar to as high as USD 150 ££per barrel.

Despite the shock, the markets’ reaction is still not showing all the typical traits of a systemic energy crisis.

An initial buffering factor was the coordinated release on 9 March by the International Energy Agency (IEA) of 400 million barrels of oil from strategic reserves. A record-breaking amount that, at current deficit levels, could theoretically cover between one and two months of tensions on the market.

A second crucial element which emerges from an analysis of the oil futures curve is that long-term contracts incorporate a decline in prices and a subsequent normalisation at around 65-70 dollars. This suggests that the market is interpreting the current shock as a short-medium-term event, the effects of which should have a limited impact in time. Demand and supply forecasts, excluding the assumption of an extended deficit phase, point towards a normalisation and a return to a balance surplus.

A third aspect, more political in nature, concerns the domestic market in the US, where a lengthy stint of the WTI index above the USD 90-95 mark would seriously damage the popularity ratings of the present administration. In view of the Midterm elections, Trump needs to promptly resolve the crisis.

Europe is facing the present shock in different conditions compared to the energy crisis of 2022.

Between 2021 and the end of 2025, EU gas imports from Russia dropped from 40-45% to 12-13%, with the aim of reducing them to zero by the end of 2027. The largest share of total imports is now commanded by Norway (30%), and US supplies are growing at a constant pace (25%).

The share imported by the EU from Qatar is small, at around 6%, and fully accounted for by LNG shipped by sea (which represents 50% of total EU gas imports). Although the weight of LNG imported from Qatar is limited, it has a greater impact on price formation in Europe. This, combined with other factors, has contributed to the upward shock to the official gas price index, which has risen by around 70% since the crisis began.

Further gas price growth, tied to production levels in Persian Gulf countries, is possible at the global level whereas in Europe the risk of a speculative dynamic similar to the one seen in 2022 is limited, thanks to the increased number of regasification plants, to larger warehouse inventories, and to a more cautious management of stocks.

For what concerns oil, Europe’s position seems better protected thanks to the greater geographical diversification of imports: United States, Norway, and Kazakhstan, currently account for 45% of EU oil imports.

The key variable in the present crisis is the duration of the Hormuz strait blockade, and therefore the scope of the drop in oil and gas energy supplies, considering that normalising flows and restoring production to previous levels will take weeks, if not months.

If the Hormuz strait remains closed at length, the margin guaranteed by strategic reserves would start to rapidly shrink. Logistics alternatives (land transport) may only absorb a limited share of the drop in volumes, estimated at between 30 and 40%. However, there would be no issues in proceeding with further releases of strategic reserves.

For as long as the energy deficit is perceived as temporarily balanceable, prices will reflect an energy shock that is considered manageable. At the global level, other regions are incurring even more significant consequences than Europe (in Asia, gas prices have increased more than in Europe); therefore, pressures towards finding a solution to the conflict will be more intense than was the case during the 2022 energy crisis.

In case of an extended phase of high energy prices, with a resulting heightening of inflation pressures and a slowing of global economic growth, in the present phase a scenario of the central banks opting for stable rates rather than the reopening of a new restrictive phase seems more likely to materialise.