International Energy: Global Economy at Risk as Hormuz Closure Continues

The Arab News – Fatih Birol, Executive Director of the International Energy Agency, warned that the global economy would face a renewed challenge if the conflict paralyzing navigation in the Strait of Hormuz is not resolved.

Birol said markets are experiencing anxiety and significant uncertainty due to escalating tensions between Washington and Tehran, which threaten to disrupt shipments of oil, fertilizers, natural gas, and other goods passing through the strait. He added that the strait must be reopened within weeks, not months, and must be fully open without any conditions.

Oil prices rose to their highest level in a month as supply disruptions in the Strait of Hormuz worsened amid the attacks. Prior to the outbreak of the war, about one-fifth of global oil and liquefied natural gas supplies passed through the strait.

In a note, Goldman Sachs estimated that Gulf exports had recovered to more than 80% of pre-war levels following the US-Iran memorandum in June, but fell to less than 50%, or about 11 million barrels per day, during the past week.

The bank said Brent crude could exceed $110 per barrel in the fourth quarter of the year if Gulf export recovery continues to stall. Nevertheless, investors remain cautious about excessively adding a risk premium to oil prices amid the ongoing volatility in developments.