Markets are jittery as fears mount over potential disruption to global energy supplies, with analysts warning that European natural gas, not oil, is the more immediate flashpoint.
About 20% of global liquefied natural gas (LNG) supply, roughly 83 million tonnes annually, comes from Qatar and the UAE and passes through the Strait. With Europe only halfway through refilling its seasonal gas storage, any disruption could replay the 2022 energy crisis, accoding to analysts at Stifel.
In such a scenario, Europe would likely outbid Asian buyers to secure LNG, sending prices soaring to EUR 100–200/MWh—2.5 to 5 times current levels. For UK households, that could translate into an energy price cap of 3,000–4,500 pounds per year, a politically and economically explosive outcome.
While oil markets are clearly rattled, the risk is more contained. Goldman Sachs estimates that if oil flows through the Strait were halved for a month and remained down 10% for the rest of the year, Brent crude could briefly spike to $110 per barrel—a sharp jump that would echo the post-Ukraine invasion shock.
Goldman, citing data from Polymarket, notes that markets are now pricing in a 52% chance of Iran closing the Strait of Hormuz in 2025, up sharply from just days ago.
Goldman Sachs previously projected that Euro Area growth could be reduced by 0.1 percentage points if Brent crude rises to $90 per barrel, and by 0.4 percentage points in a more severe scenario involving disruptions to the Strait of Hormuz.
The trigger? A dramatic escalation over the weekend, when the U.S. launched airstrikes on Iran’s nuclear facilities. Iran’s parliament has reportedly backed a measure to close the Strait, though the final decision rests with the country’s Supreme National Security Council, according to Iran’s Press TV.
While a full closure remains uncertain, the risk premium is now firmly baked into energy markets. Goldman notes that global powers, including the U.S. and China, have strong economic incentives to avoid a prolonged disruption.
Source: Reuters