Yergin, vice chairman of S&P Global, said the immediate impact of the disruption is likely to be felt most strongly in Asia, which now receives more than 80% of the Gulf’s oil exports and about 90% of its liquefied natural gas shipments.
Writing in the Financial Times, he emphasised that the closure of Strait of Hormuz has a far-reaching impact beyond the notable 20% of global oil supplies that passes through it.
Nearly one-fifth of global LNG, largely from Qatar, also travels through the narrow waterway.
“On any given day, as many as 90 tankers could usually be seen sailing through the strait,” Yergin wrote. “Now there are virtually none,” he added, citing drone attacks on commercial vessels, threats from Iranian speedboats and surging war-risk insurance premiums.
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The disruption is already rippling through global markets. Yergin wrote that Brent crude prices have climbed about 50% since the US military build-up in the Gulf began, while Asian spot LNG prices have nearly doubled since the war started. European natural gas prices are also up roughly 50%, as Asian buyers bid up supplies and divert cargoes from other markets.
The ‘nightmare scenario’
Yergin warned of a “nightmare scenario” in particular, tracing the origins of that fear back to the turmoil surrounding Iran’s 1979 revolution.
Strikes by oil workers in Iran in the autumn of 1978 disrupted supplies from one of the world’s major producers and helped trigger panic in global markets, he wrote.
Since then, energy analysts have long feared that a major conflict in the Gulf could interrupt the vast volumes of oil flowing through the region, a shock that could send energy prices soaring and push the global economy into a deep recession.
Yergin has sounded that alarm for the situation unfolding in West Asia today.
