The International Energy Agency has warned that the energy crisis could worsen due to the war in Iran, with IEA chief Fatih Birol stating that the situation in April looks darker than it was in March. According to research from multiple sources, the conflict has upended global financial and energy markets, raising concerns of a global economic crisis or recession. Oil prices have soared, with Brent crude at $106 per barrel as of a Monday morning after the conflict began, up more than 40% from $72 per barrel on February 27. Birol emphasized in a press conference that the longer the interruption lasts, the more serious the problem becomes, highlighting immediate market impacts.
Iranian attacks have severely disrupted global energy flows, with research indicating Iran launched ballistic missiles targeting Israel, US military bases, oil depots, and infrastructure across the Gulf region. Iranian attacks on vessels in the Strait of Hormuz have dramatically reduced traffic through the strait, which about 20% of global oil and gas supplies transit through, according to multiple sources. The Strait of Hormuz closed on 4 March 2026, causing Brent crude to surge past $120 per barrel and QatarEnergy to declare force majeure on all exports. This closure has led to the largest supply disruption in the history of the global oil market, as described by the International Energy Agency.
Production losses have been severe, with oil production in Kuwait, Iraq, Saudi Arabia, and the UAE dropping by 6.7 million barrels per day by 10 March and by at least 10 million barrels per day as of 12 March, according to research. The current crisis represents the loss of 11 million barrels of oil per day and about 140 bcm of gas, according to IEA head Fatih Birol. In response, the IEA released 400 million barrels of oil from strategic reserves on 11 March, the largest emergency measure in its history, as reported by multiple sources. At least 40 energy assets in the Gulf region have been severely or very severely damaged, according to Birol.
The situation in April looks darker than it was in March.
Asian energy dependence has been sharply exposed, with about 84% of crude oil and 83% of LNG that passed through the Strait of Hormuz in 2024 bound for Asia, according to the US Energy Information Administration. China, India, Japan, and South Korea accounted for nearly 70% of oil shipments through the strait, with about 15% bound for the rest of Asia, per the same source. LNG prices have risen by almost 60% since the start of the war, according to analyst Muyu Xu, and QatarEnergy suspended its LNG production after an Iranian drone attack on March 2, as reported by research.
Historically, the impact echoes the 1970s energy crisis through supply shortages, inflation, and risks of stagflation and recession, according to research. Fatih Birol, IEA head, stated that the global energy crisis is equivalent to the combined force of the 1970s oil shocks and Russia's invasion of Ukraine, underscoring its scale.
Oil price volatility has been marked by conflicting forecasts, with Brent crude at $106 per barrel as of a Monday morning after the conflict began, but surging past $120 per barrel after the Strait of Hormuz closed on 4 March 2026. A Capital Economics report suggests oil prices could fall to $65 per barrel by year-end if the conflict is short-lived, or rise to around $130 per barrel in Q2 if longer. Analysts believe an Israeli attack on Iranian oil export facilities could cause oil to surge almost 40%, back towards $100 per barrel, potentially igniting inflation and ruling out interest rate cuts.
The longer the interruption lasts, the more serious the problem becomes.
US political involvement has been contradictory, with research indicating US President Joe Biden discussed military strikes against Iran's oil export facilities with Israel, causing crude oil prices to surge 5% initially and 8% by week's end. Biden later warned Israel against attacking Iranian oil facilities and ordered it to find 'other alternatives', according to multiple sources. In contrast, other reports state US President Donald Trump gave Iran 48 hours to reopen the Strait of Hormuz, warning of destruction of its energy infrastructure.
Iranian responses have highlighted infrastructure vulnerabilities, with Iranian Oil Minister Mohsen Paknejad stating they are not afraid of enemies igniting a crisis after visiting Iran's main oil export terminal on Kharg Island. Iran produces around 3% of global oil output and exports have reached multi-year highs, with most oil going to China, according to research. Iran's army said it would target energy and desalination infrastructure belonging to the US and the regime in the region in response to Trump's threat.
Broader economic consequences include interest rate reductions expected to be postponed or increased due to higher inflation, as per research, and stock markets declined globally with a global bonds market sell-off.
We are not afraid of enemies igniting a crisis.
A regional humanitarian crisis has emerged, with a 'grocery supply emergency' occurring in Gulf Cooperation Council states, where 70% of food imports were disrupted by mid-March, causing price spikes of 40–120%, according to research. Iranian strikes on desalination plants threatened drinking water in Kuwait and Qatar, and the regional aviation sector, including Emirates and Qatar Airways, faced near-total cessation due to airspace closures.
Damage assessment remains incomplete, with at least 40 energy assets in the Gulf region severely or very severely damaged, according to IEA head Fatih Birol.
Shipping disruptions have created April delivery uncertainties, with IEA chief Fatih Birol noting that deliveries in March consisted of goods that were loaded before the conflict broke out. According to Birol, so far in April, nothing new has been loaded in the Persian Gulf.
Geopolitical image and regional stability have been shaken, with the Middle East Council on Global Affairs reporting that the war has damaged the Gulf's image as a safe destination for expatriates, immigrants, and tourists.
Potential diplomatic and military developments include Japan saying it could consider deploying its military for minesweeping efforts if a ceasefire was reached.