The Wall Street Journal pulls back for a 30-000-foot view of the Iran war's effect on the world's energy supply, under the sobering headline, "The Long-Feared Persian Gulf Oil Squeeze Is Upon Us." Tehran has essentially closed the Strait of Hormuz, meaning no crude is getting shipped: Its strategy is apparently to make the war as painful as possible worldwide and force the US to back down. "In the whole written history of the strait, it has never been closed, ever," JPMorgan Chase analyst Natasha Kaneva tells the newspaper. "To me, it was not just the worst-case scenario. It was an unthinkable scenario."
More than a week into the conflict, analysts say the world is confronting its most severe jolt to energy markets since the 1970s. If flows through Hormuz don't resume within days, regional oil output could fall by more than 4 million barrels a day—and potentially more than double that by late March, close to a tenth of global demand. In another significant development, Bloomberg reported Monday that Saudi Arabia, the world's biggest oil exporter, has started reducing production, following the lead of smaller nations. And it's not just oil, which is now above $100 a barrel: Qatar has shut its massive Ras Laffan facility after Iranian drone attacks, instantly removing about 20% of the world's liquefied natural gas supply. Middle Eastern aluminum smelters also are curtailing operations.
The hit from all this will be felt unevenly, the Journal explains. The US, now a major energy exporter, is better cushioned than in past crises, but gasoline and jet-fuel prices are jumping, pinching consumers and airlines and complicating President Trump's economic agenda. Europe and Asia, far more dependent on Gulf crude and gas, already are moving into emergency mode. "We are looking at what is by far the biggest disruption in world history in terms of daily oil production," says energy historian Daniel Yergin. "If it goes on for weeks, it will reverberate across the global economy."
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