Hormuz Crisis Deemed Largest Energy Disruption in History by S&P Analyst Yergin

Strait of Hormuz Crisis: Global Energy Supplies on the Brink

The ongoing Strait of Hormuz crisis has been deemed the "biggest energy disruption we've ever seen" by S&P Global Vice Chairman Daniel Yergin. Despite oil prices not yet reaching the inflation-adjusted equivalent of previous highs, the impact of the crisis extends far beyond oil, affecting global supplies of natural gas, fertilizer, helium, aluminum, and petrochemicals.

The region of Asia is bearing the brunt of the crisis, with 80% of the oil and 90% of the LNG (liquefied natural gas) destined for the continent. This stark reality is at odds with the resilience of financial markets, which Yergin notes is a sign of a "divergence" between markets and the actual experiences of people in Asia. In reality, shortages, rationing, and business closures are becoming increasingly common due to the lack of energy.

As the crisis continues to unfold, it has taken on the form of a clash between two blockades: the US economic pressure on Iran and Tehran's ability to wage war on the world economy. Time is of the essence, as inventories are being drawn down and the longer the crisis persists, the greater the risk of upside consequences.

Read also: Hormuz Strait Shipping Activity Remains Extremely Low Amid Iran Naval Presence

In the long term, Yergin predicts that the crisis will lead to a greater focus on energy security among Gulf countries and accelerate the transition to electric vehicles. Notably, 20% of the cars built in the world this year are expected to be electric vehicles, a figure that is likely to increase in the wake of the crisis.