The global oil supply shock is set to intensify, with disruptions from the Middle East expected to double in April and directly hit European economies, the International Energy Agency said Thursday. More than 12 million barrels of oil have been lost since the start of the U.S.-Israel war on Iran, a result of attacks on regional energy assets and the closure of the critical Strait of Hormuz.
"The loss of oil in April will be twice the oil loss in March, on top of the loss of LNG... It will come through inflation and will cut economic growth in many countries," IEA head Fatih Birol said in a podcast with Nicolai Tangen, head of Norway's sovereign wealth fund.
The supply crunch is expected to widen significantly as cargoes contracted before the war finish their journeys. The primary issue is a looming shortage of jet fuel and diesel, which is already affecting Asia and will soon reach Europe by April or May, Birol added. The current disruption is worse than the oil crises of 1973 and 1979 combined with the loss of Russian gas in 2022, representing what Birol called "a major, major disruption and the biggest in history up to now."
This economic fallout stems from the fifth week of a U.S.-Israeli war against Iran, which escalated after Tehran blocked the Strait of Hormuz. While the U.S. and Israel have achieved significant military objectives, leveling Iran's defense-industrial base and striking over 2,000 missile-related targets, a decisive strategic victory remains uncertain. Iran, which has launched more than 1,000 missiles, has repeatedly demonstrated an ability to reconstitute its military capabilities, allegedly with assistance from China.
Despite the degradation of Iran's missile and naval assets, including the sinking or damage of over 155 ships, the regime's capacity to disrupt shipping with small speedboats, mines, and drones persists. This has created a strategic bind for the U.S., which has made military progress but has not yet achieved its goal of permanently neutralizing the threat. President Trump has acknowledged the remaining challenge, even as he noted "victories like few people have ever seen before."
The conflict's endgame remains unclear. While the U.S. stated regime change was not its primary goal, the focus has been on degrading Iran's military capabilities to the point that the Iranian people could potentially overthrow the government. However, the path to such an outcome is fraught with risk, and President Trump recently seemed to shift the goalposts, stating "regime change has occurred because of all of their original leaders’ death." The administration continues to weigh more escalatory options, but each carries substantial risk of widening the conflict and further elevating energy prices.
This article is for informational purposes only and does not constitute investment advice.
