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The disruption of Persian Gulf energy flows is driving inflation, economic turmoil, and a global realignment that favors China and Russia.<\/p>\n
An energy crisis is taking shape that could reorder the global economy and accelerate the shift toward a multipolar world. With Iran controlling the Strait of Hormuz and the US enforcing a blockade across the Persian Gulf, as much as one-fifth of global oil supply has been removed from the market.<\/p>\n
Even if shipping resumed tomorrow, the damage has already been done. Strategic reserves are being drained, supply chains have been disrupted, and oil production cannot simply be switched back on overnight.<\/p>\n
There will be many losers and few winners. Much of the world faces a new wave of inflation, economic stagnation, and social unrest. Africa is likely to bear the heaviest burden, as fertilizer shortages drive food prices higher and deepen existing vulnerabilities.<\/p>\n
China and Russia stand to win. China is the largest importer of oil and will, in the short term, face setbacks. But it is also the biggest producer of green energy, with exports surging amid the oil crisis. As for Russia, it is the third largest producer of oil and the second largest exporter. Possessing what the rest of the world needs, it will exercise its leverage to have countries lift sanctions and stop supporting Ukraine.<\/p>\n
The illusion of stability\u00a0<\/strong><\/p>\n The US-Israeli war of aggression against Iran has created the worst oil crisis in history. During the\u00a01973 OPEC Crisis<\/a>\u00a0and the\u00a0Gulf War<\/a>, seven percent of oil went off the market for five months and two months, respectively. The Iran War has seen up to\u00a020 percent<\/a>\u00a0of oil gone for over three months.<\/p>\n The surprise is not how severe the disruption has become, but how calm markets remain. During the OPEC crisis and the Gulf War, oil\u00a0prices quadrupled<\/a>\u00a0and\u00a0doubled<\/a>, respectively. The Iran war initially sent prices nearly 70 percent higher than pre-war levels, yet prices have since settled at roughly one-third above where they stood before the conflict.<\/p>\n For months, US President Donald Trump has promised a permanent ceasefire and the reopening of the Strait of Hormuz. China has also spent years preparing for a major conflict in West Asia by expanding its strategic petroleum reserves (SPR). It is now\u00a0drawing down<\/a>\u00a0those reserves rather than purchasing oil on international markets, reducing imports to their lowest level in nearly a decade and helping suppress prices.<\/p>\n The US is doing much the same. The past\u00a0three weeks<\/a>\u00a0have recorded the largest SPR drawdowns on record.<\/p>\n Yet markets are not behaving rationally. Oil traders and analysts are betting that Washington and Tehran will eventually strike a deal and restore normal supply. Few want to wager on sustained high prices only to see a diplomatic breakthrough wipe out those positions.<\/p>\n This optimism may benefit consumers in the short term, but it risks making the eventual adjustment more painful. Higher prices would encourage conservation and force governments to adopt emergency measures. Instead, consumption continues largely unchanged despite a fifth of global oil supply having disappeared.<\/p>\n On the supply side, higher-cost producers require confidence that elevated prices will endure. Shale production, for example, depends not only on high prices but also on stable ones. With prices swinging sharply on every political development, investment\u00a0remains constrained<\/a>. The US, the world’s largest oil producer, has seen production remain largely\u00a0unchanged<\/a>\u00a0compared to pre-war levels.<\/p>\n Even under the most optimistic scenario, the energy crisis is far from over. Reopening the Strait of Hormuz would not instantly restore oil flows. Wells that have been shut down\u00a0can take weeks<\/a>\u00a0to return to full production. Tankers departing the Persian Gulf require around\u00a040 days<\/a>\u00a0to reach their destinations, and recent reports suggest delays could be even longer.<\/p>\n Many vessels have spent months idle in shallow waters, accumulating\u00a0barnacles<\/a>\u00a0that reduce efficiency and may require cleaning before they can return to service.<\/p>\n The extent of damage to oil infrastructure also remains unclear. Equally uncertain is whether shipping companies and insurers will be willing to operate through a waterway potentially littered with mines.<\/p>\n For these reasons, Goldman Sachs estimates that if the Strait of Hormuz were fully reopened, it would take\u00a0three months<\/a>\u00a0to reach 70 percent of Persian Gulf oil output. In that scenario, the world would still be losing six percent of all oil, nearly the same as the OPEC crisis and the Gulf War.<\/p>\n As noted, SPRs have helped mitigate the crisis. But this is not sustainable. The US SPR is at the\u00a0lowest in two years<\/a>. In a few days, it is expected to hit the lowest ever since the SPR began filling in the 1970s and early 1980s.<\/p>\n The US has 357 million barrels of oil in its SPR, and the last three weeks have set the top three record drawdowns. At the current rate, the SPR has only 40 weeks left. That might sound like a lot of time, but SPRs cannot be reduced to zero.<\/p>\n Oil is stored in salt caverns, and drawing the oil too quickly risks collapsing them. More realistically, the SPR can only go\u00a0down to 150 million<\/a>, giving 20 weeks left. This is coming right before summer, when oil demands will shoot up.<\/p>\n For these reasons, even optimistic commodities traders expect year-end prices to\u00a0remain 25 percent higher<\/a>\u00a0compared to before the war. We can expect similarly high prices for gas and fertilizer. The world is not seeing cheap commodities anytime soon.<\/p>\n Who pays the price, and who profits<\/strong><\/p>\n \u201cA prolonged closure of the Strait of Hormuz poses the single greatest threat to global energy markets in decades,\u201d\u00a0according<\/a>\u00a0to a report from consulting group Wood Mackenzie.<\/p>\n The report stated that if oil remains disrupted for the next four months, there will be a global recession. Recall, according to Goldman Sachs, the world would still see six percent of oil missing three months after the Strait fully opens.<\/p>\n The global impact will be uneven. Worst affected will be Africa, where around\u00a0half of the income<\/a>\u00a0is spent on food. Fossil fuels are a key ingredient in fertilizer, 30 percent of which comes through the Strait of Hormuz.<\/p>\n Farmers are cutting back production as sulfur prices have\u00a0tripled<\/a>. In 2007 and 2008, skyrocketing food prices resulted in mass protests, including riots in Burkina Faso, Cameroon, Cote d’Ivoire, Morocco, Mozambique, Senegal, and Tunisia, and a\u00a0general strike<\/a>\u00a0in Egypt.<\/p>\n With resentment growing against the western world, the coming crisis is also an opportunity for Africans to\u00a0throw off<\/a>\u00a0the last vestiges of American and European colonialism. If the\u00a0anti-imperialist<\/a>\u00a0Alliance of Sahel States can weather the storm, it could become a beacon of hope for other African states to follow.<\/p>\n China faces short-term challenges, as the largest importer of oil in the world, a\u00a0third<\/a>\u00a0of which comes from the Persian Gulf. To supplement this loss, it is drawing down its SPR. Yet, just like the US, these draws cannot last forever.<\/p>\n In March, it was\u00a0estimated<\/a>\u00a0that China\u2019s reserves would last three to four months. That time is coming to an end. And when it occurs, China will have to pay for higher-priced oil, driving up costs that will cut into economic growth.<\/p>\n Yet Beijing also possesses advantages unavailable to most of the world.<\/p>\n China produces\u00a080 percent<\/a>\u00a0of solar panels. Solar has been criticized for being unreliable, with cloudy weather disrupting energy. But with oil supply unstable, solar is now seen as the more reliable alternative.<\/p>\n Beijing also produces\u00a080 percent<\/a>\u00a0of batteries and\u00a075 percent<\/a>\u00a0of electric cars. China\u2019s clean energy industry is worth\u00a0$2 trillion<\/a>\u00a0and accounted for one-third of economic growth in 2025.<\/p>\n Expanding exports of renewable energy technology will not only generate revenue but also strengthen China’s position as a provider of energy security during a period of global instability.<\/p>\n Even before the Iran war, China was\u00a0supplying<\/a>\u00a0Cuba with solar panels amid the illegal US blockade of the country. It is the world’s second-largest exporter of oil and gas. Occupying the heart of Eurasia, it can supply energy markets through both Atlantic and Pacific routes.<\/p>\n When oil prices rose dramatically in 2007, Russia experienced its second-highest\u00a0economic growth<\/a>\u00a0since the dissolution of the Soviet Union. More importantly, countries will have to turn to Moscow to keep prices down and secure supply.<\/p>\n Both the\u00a0UK<\/a>\u00a0and the\u00a0US<\/a>\u00a0have recently lifted some sanctions on Russian oil. Countries facing energy crises will have no choice but to get closer to Moscow. India, for instance, has recently signed\u00a0agreements<\/a>\u00a0with Russia on shipbuilding and labor mobility.<\/p>\n This comes as India\u2019s share of Russian oil has risen to\u00a038 percent<\/a>\u00a0and its premium payment has increased fourfold. Even in Europe, imports of Russian gas are the\u00a0highest<\/a>\u00a0since the 2022 invasion of Ukraine.<\/p>\n Kiev has responded by targeting Russian oil and gas infrastructure. Although\u00a0output<\/a>\u00a0may have fallen, fossil fuel export revenue is the\u00a0highest<\/a>\u00a0since September 2023. As the crisis worsens, countries, including those in Europe, will have to choose between supporting Ukraine and keeping the lights on.<\/p>\n
\nRussia, however, may emerge as the biggest beneficiary.<\/p>\n