The UK will host an international conference on April 1 to find a diplomatic solution for the Strait of Hormuz, as the waterway's month-long closure threatens a global energy crisis worse than the 1970s.
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UK to Host April 1 Conference as Hormuz Closure Chokes Oil Supply
UK Prime Minister Keir Starmer announced that Foreign Secretary David Cooper will lead an international conference this week to restore navigation in the Strait of Hormuz, where a month-long closure has cut global oil flows by an estimated 11 million barrels a day and pushed Brent crude prices over $112 a barrel.
"We are exploring all available diplomatic avenues to push for the reopening of the Strait of Hormuz," Starmer said at a press conference on April 1, adding that the best way to address the rising cost of living is to "de-escalate the situation and ensure the strait reopens."
The disruption has already sent shockwaves through energy markets, with Brent crude surging 55% since the conflict began. The closure blocks about 20% of globally exported crude and a fifth of LNG supplies. In response, the International Energy Agency has coordinated a strategic stockpile release of up to 3 million barrels a day, but analysts warn this is a finite solution.
The conference's outcome is critical, as a prolonged closure could send oil toward an unprecedented $200 a barrel, according to some Wall Street forecasts. Failure to secure passage would force significant global demand destruction, risking a stagflationary shock that could derail central bank policies and impact major elections.
A Finite Buffer
The market impact has been partially softened by temporary measures. Saudi Arabia and the United Arab Emirates are rerouting some oil via pipelines that bypass the strait, and a record release of stockpiled oil from the US and other IEA members has helped tame prices. The US also temporarily lifted sanctions on some stranded Russian and Iranian oil, making it available to more buyers.
However, industry leaders warn these are short-term fixes. "The playbook is pretty bare at this point," said Mike Sommers, CEO of the American Petroleum Institute, questioning how much more the US can do to shield consumers from price shocks. Patrick Pouyanne, CEO of TotalEnergies SE, warned that if the crisis lasts more than three or four months, it becomes a "systemic problem for the world."
Refined Fuels Signal Deeper Pain
While crude futures remain below their 2008 peak, prices for refined products like diesel and jet fuel have rocketed, at times topping $200 a barrel and offering a preview of the demand destruction to come.
The impact is most acute in Asia, which relies heavily on shipments through the strait. Consultant FGE NexantECA estimates Asian demand has already fallen by nearly 2 million barrels a day in March. Pakistan has urged citizens to watch cricket from home to save fuel, shortages are appearing in Thailand and Australia, and several Asian nations are curbing fuel exports. Now, traders are warning that Europe and Latin America face similar supply shortages in the coming weeks, particularly for diesel.
The longer the strait remains closed, the greater the risk of a full-blown fight for supplies. "For as long as Hormuz remains closed, both oil and gas markets don’t balance," said Aldo Spanjer, head of energy strategy at BNP Paribas. "The significant demand destruction we would require... will require significantly higher prices than today."
This article is for informational purposes only and does not constitute investment advice.
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