Global Economy at Risk of Entering Recession if Strait of Hormuz Disruptions Persist, IEA Official Warns

Global Economy Faces Heightened Risks as Strait of Hormuz Remains Closed

The International Energy Agency (IEA) has issued a warning that the global economy could face significant risks if the Strait of Hormuz is not fully reopened in the coming weeks. The agency is closely monitoring developments, but does not currently see the need for another emergency release from strategic oil reserves, following a record 400-million-barrel stock release that helped ease market pressures.

Crude oil prices remain significantly above pre-conflict levels, creating challenges for oil-importing countries through higher energy costs and inflation. The IEA Executive Director, Fatih Birol, has cautioned that the energy market is facing a major problem, with the current crisis being the largest in history.

The crisis has resulted in a significant loss of oil and gas, with the amount lost in this crisis exceeding the combined losses from the three major energy crises of the last half century: the 1973 oil crisis, the 1979 oil crisis, and the 2022 natural gas and oil crisis following the Russia-Ukraine war.

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The oil market had initially been supported by surplus supply and inventories, but those cushions are gradually being depleted. Fatih Birol noted that the surplus and inventories that were available before February 28 have been used, and new money is not coming in to replace them.

The IEA is warning that if the Strait of Hormuz is not fully reopened by the end of June, July, and August, the global economy could enter a critical phase, particularly in Asia. The travel season is about to start, with many countries planning to increase flights, car travel, and bus usage, which could exacerbate the situation.