The Global Energy Order Has Entered Its Most Disruptive Era

Following the US-Israeli strikes against Iran on February 28, West Asia has been plunged into a wider and potentially prolonged conflict. In response Iran continues to block tankers from shipping millions of barrels of crude oil each day through the Strait of Hormuz. Energy infrastructure has been targeted with startling speed, faster than American planners seemed to anticipate. What is increasingly clear is that the Trump administration did not prepare adequately for worst-case scenarios. The International Energy Agency (IEA) has described this as the largest supply disruption in the history of global oil markets. Oil prices have responded with violent swings.

On March 11, Iran warned the world to brace for oil at $200 a barrel. In an attempt to calm markets, the IEA ordered the largest release of government reserves in its history and its 32 members unanimously agreed to release 400 million barrels of strategic petroleum reserves. The US pledged an additional 172 million barrels from its own stockpile. Despite this massive release of government oil markets remained unconvinced. On March 12, global oil prices surged past $100 a barrel, a steep climb from the $60 range seen in mid-February.

The critical question is not how much oil governments promise to release, but how much can actually reach the market each day. Historically, the US has rarely managed more than one million barrels per day. The Trump administration now claims it can push 1.5 million. Ipek Ozkardeskaya of Swissquote notes, “The math is simple: 400 million barrels would only be enough to meet the IEA’s oil demand for roughly 9–10 days.” Oxford Economics has identified $140 per barrel as the threshold at which the global economy tips into recession.

On March 15, the IEA announced governments had pledged 271.7 million barrels from reserves. Yet Brent crude continued to climb, trading at $103. When Brent hovers around $100, refined fuel oil prices soar even higher once refining margins are added. In India, crude touched $127.22. In Singapore, fuel oil, often called “the bottom of the barrel” traded at $140. In Fujairah, a key refueling port near the Strait of Hormuz, prices reached nearly $160, with cleaner blends fetching as much as $175. And the longer the strait stays closed, prices will climb far higher, with profound economic and political consequences.

The current disruption dwarfs past crises. It represents 20% of global oil and product flows, and 20% of LNG shipments. By comparison, the Arab oil embargo of 1973 removed about 7% of world supply; the Gulf War disrupted 6%. Today, at least 1,000 ships are stuck outside the Strait of Hormuz. And it is not just oil: fertilizer, sulphur, metals, and natural gas particularly from Qatar, which accounts for 20% of global LNG trade are all trapped.

Yet the release of US reserves came only after nearly two weeks of paralysis, suggesting Washington failed to anticipate such a move. Given the vulnerability of the Gulf and the centrality of Hormuz in US energy planning since the 1970s from the OPEC embargo to the Carter Doctrine this points to a serious lapse in contingency planning. It was fanciful to imagine Iran would simply absorb strikes without deploying asymmetric tools at its disposal.

In his trademark bravado, Trump has sought to project control. At a rally in Kentucky, he boasted that US forces had destroyed 58 Iranian naval ships and promised oil prices would fall. He told reporters in Washington that Iran was “pretty much at the end of the line,” claiming its navy, air force, and air defences had been eliminated. Despite announcing on March 3 that American ships would escort vessels stuck in Hormuz, no such operations have materialised. On March 14, reports appeared that the US is repositioning its amphibious assault ship USS Tripoli based in Sasebo to the ‘Middle East’ in what is seen as a possible tactic to restore vessel traffic through the Strait of Hormuz. Trump has also urged allies to send warships to secure the strait.

Iran’s new supreme leader has vowed to keep the strait closed indefinitely. In a world of collapsing geopolitical order and intensifying great-power rivalry, energy was always destined to become a weapon. It was precisely because they feared energy infrastructure would be targeted that the Gulf states had lobbied against launching this war.

Trump and Energy Secretary Chris Wright have openly suggested that soaring prices might be “good” for the US which is now a net exporter of oil. On his Truth Social account, Trump declared: “The United States is the largest Oil Producer in the World, by far, so when oil prices go up, we make a lot of money.” Yet this overlooks the distributional effects. Oil Change International drew parallels to 2022, when Russia’s invasion of Ukraine triggered a global cost-of-living crisis while the five largest oil companies made nearly $200 billion in profits. Half of US firms’ profits went to the richest 1% of individuals. The same dynamic is now unfolding: high prices enrich a narrow elite while burdening the vast majority.

Far from achieving regime change in any ideological sense, the war has instead steeled Iran’s resolve and appears to have dissolved the very domestic opposition upon which the United States had wagered its hopes. The war in West Asia, has shattered the projections that a rapid transition to clean energy would render energy geopolitics obsolete. The notion of a structural “oil glut” has collapsed. The conflict has reminded the world that fossil fuels remain deeply entangled with global security, and that energy will continue to be wielded as both weapon and vulnerability. The other lasting impact, even after the war subsides, will likely be an enduring risk premium attached to investment in the Gulf.

Vaishali Basu Sharma is a strategic and economic affairs analyst.

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