Strait of Hormuz closure triggers global oil crisis

The war in Iran has effectively closed the Strait of Hormuz. Iranian forces have reportedly laid naval mines and effectively shut down shipping through the strait, while the U.S. and Israel have targeted the Iranian energy export hub of Kharg Island. The United States has called for allied naval escorts to safeguard commercial shipping. The IEA described the disruption as 'the largest supply disruption in history.'

Sweden's Energy Minister Ebba Busch said the current energy crisis is the worst ever. Commodity experts have warned that Sweden may be forced to ration fuel by summer, but industry representatives and analysts offer a more reassuring view. Rebecka Bergholtz, an analyst at the Swedish Energy Agency, said she sees the probability of rationing as low. Jessica Alenius, CEO of Drivkraft Sverige, stated that there is no shortage of petrol on the map and that rationing will not be necessary. Finance Minister Elisabeth Svantesson has previously said that rationing of oil may become a possibility in Sweden. The Swedish Energy Agency sees no immediate risk of physical oil shortages in Sweden in the short term.

Europe produces 70% of its jet fuel needs and imports 30%, according to multiple reports. The IEA warned that jet fuel stocks in Europe would reach a tipping point in June if at least half of imports from the Middle East were not replaced. Separately, Fatih Birol, head of the IEA, said Europe has about six weeks' worth of jet fuel left if transport through the Strait of Hormuz continues to be blocked. These two statements present different timelines. Prime Minister Ulf Kristersson said the crisis could create serious disruptions to air traffic around the world. Airlines UK is talking to the government about measures to support aviation in case of fuel disruption.

Sweden has reserve stocks of petrol and diesel for 90 days of consumption, and these have not been tapped yet, according to multiple reports. There has been no rush to gas stations to preempt possible rationing. Circle K and Preem confirm that fuel volumes are back to normal levels and no hoarding is observed. Preem refines its own petrol and diesel, with the majority of oil coming from the North Sea, and views the markets as secure. Sweden imports relatively limited volumes of crude oil directly from the Middle East compared with some Asian economies, but is deeply integrated into the European energy system. Higher oil prices translate into increased transportation costs, rising electricity prices and broader inflationary pressures in Sweden.

The IEA has coordinated the release of 400 million barrels of crude oil from various countries' reserves, an initiative that includes Sweden. Each IEA member state has 90 days and is responsible for how the stock drawdown is to be carried out. The Swedish Energy Agency has notified the IEA of Sweden's contribution. Sweden has committed to having emergency stocks equivalent to 90 days of net imports, including gasoline, diesel and aviation kerosene. The International Monetary Fund (IMF) has advised countries to consider managing energy demand through measures such as subsidising public transport or working from home. China has stockpiled oil, with reserves estimated at 900 million barrels (about three months of imports). Chinese authorities have ordered oil refineries to stop exporting fuel to keep domestic prices under control. Some Chinese airlines have cut flights as jet fuel prices rise. India's oil ministry said on 26 March that it had secured crude oil supplies for 60 days and urged residents to avoid panic buying. Nearly half of India's crude imports normally pass through the Strait of Hormuz. India's oil ministry said 'high volumes' of crude oil available in international markets had 'more than compensated for any disruption'. India slashed petrol and diesel excises, cutting duty on petrol from 13 rupees per litre to three. The Irish government announced a package worth €505m (£440m) to support consumers.

UK petrol prices have reached an 18-month high due to rising global oil prices, according to the RAC. The UK government has said it is primed to step in if there are signs petrol sellers are profiteering. The Petrol Retailers Association has denied that profiteering is occurring. Low-income households in the UK that use heating oil were eligible for a £53m package announced in March.

The UAE is Sweden's third-largest trading partner in the Middle East, with over 250 Swedish companies operating there. Swedish exports to the UAE reached roughly $1.4 billion in recent years. Swedish firms including Ericsson, Volvo and IKEA maintain operations in the UAE and across the Gulf.

Fuel shortages first lead to price increases, which can make flights unprofitable and lead to cancellations, reducing demand, according to David Sällh, responsible for security issues at the fuel companies' industry organization. Other oil producers like the US and Nigeria could potentially compensate for some of the shortfall with increased deliveries, according to multiple reports. Rationing is not imminent; there are other tools available before that step is taken, according to David Sällh, Rebecka Bergholtz, and Jessica Alenius. The exact measures that would be taken before rationing remain unspecified. The exact current level of Sweden's emergency fuel stocks is not publicly detailed. It is unclear how much of Sweden's jet fuel supply is imported via the Strait of Hormuz. The sufficiency of the IEA-coordinated release of 400 million barrels to prevent shortages in Europe is uncertain. The status of diplomatic efforts to reopen the Strait of Hormuz is unknown.