Live updates: Follow the latest news on US-Iran war
Amid the turmoil in global energy markets caused by Iran effectively holding the Strait of Hormuz hostage, it was significant to see an industry event in US this week offer a different take on the sector’s future. CERAWeek, which is running in the oil-rich state of Texas, explored a tech-driven future in which robots, AI and low-carbon solutions improve supply, cut costs and improve safety.
To reach that future however, some immediate obstacles must be overcome – specifically Iran’s throttling of the Strait Hormuz. In a virtual address to CERAWeek on Monday, Dr Sultan Al Jaber, Minister of Industry and Advanced Technology and managing director and group chief executive of Adnoc, made clear what was at stake.
“Weaponising the Strait of Hormuz is not an act of aggression against one nation, it’s economic terrorism against every nation,” Dr Al Jaber said. “No country should be allowed to hold Hormuz hostage.”
He was speaking after new threats from Tehran to mine the vital waterway, through which pass a fifth of the world’s oil as well as a significant amount of natural gas and vital chemical products. Iran’s disruption has already had global – and unequal – consequences. Although wealthy countries can weather price shocks, poorer nations and emerging economies face inflation and instability, effects that are at odds with Iran’s purported anti-imperialism. "This is raising the cost of living for those who can least afford it and slowing economic growth everywhere," Dr Al Jaber noted.
Indeed, Iran has previously used the term “economic terrorism” to hit back at international sanctions, complaining that these illegally disrupt its relations with other countries. By attacking shipping in Hormuz, however, Tehran is not only acting illegally but it punishes the economies of its trade partners. About 90 per cent of India’s liquefied petroleum gas – used in cooking – usually passes through the Strait of Hormuz. Iran’s strongarming of the world economy in the strait has created an LPG supply crisis in a number of countries, like India. This is hitting domestic households and commercial establishments.
At the beginning of the conflict, International Monetary Fund managing director Kristalina Georgieva said a 10 per cent increase in oil prices over the course of a year could raise global inflation by about 40 basis points and reduce global economic growth by between 0.1 and 0.2 per cent. This indiscriminate effect shows that although Tehran may regard blocking the strait as a political card, playing it in this way threatens the whole world.
No doubt, Iranian civilians have paid a very high price for Tehran’s intransigence and US-Israeli aggression. But blocking the strait makes Hormuz a security issue, not a trade one. This tactic only underlines the argument that Iran has become a rogue state that must be reined in. Rumours of talks and de-escalation have yet to be confirmed, but the time for an end to taking the world's energy supply hostage is now.
