The EU’s Energy Commissioner said its bracing for a “long-lasting” energy shock from the Middle East war.
Dan Jorgensen told the Financial Times the EU is assessing “all possibilities” including fuel rationing and releasing more oil from emergency reserves.
Yesterday, 40 countries discussed reopening the Strait of Hormuz after President Trump’s Iran address.
The US was not involved and no specific agreements were made during the discussions.
This week, in a report from Oxford Economics, it said the military timeline differs from the economic timeline.
“Trump generally reinforced prior public comments that the war will end in a few weeks, but the military timeline differs from the economic one,” said Oxford Economics Chief Global Economist Ryan Sweet.
“The Strait of Hormuz is still effectively closed, and the baseline assumes that it won’t change until the end of April, removing additional oil supply from the market and adding to the economic costs with each passing day,” he said.
Despite President Trump saying they would hit Iran “extremely hard” over the coming weeks, he has also said the war could be over in two to three weeks.
Speaking on RTÉ’s Morning Ireland Davy Chief Economist Kevin Timoney said the economic consequences are tricky to unpack at the moment given the mixed messages.
“Globally, you’ve already seen a lot of countries in Asia, for example, hit with rationing,” he said. “A lot of the Strait of Hormuz, oil, LNG, liquefied natural gas, that has been destined for Asia in large part and they have been feeling the sharp end of this crisis straight away.”
“The economic implications of all of that are really tricky, these are global markets and obviously prices here have already been affected too,” said Mr Timoney.
We have seen previously how disruption to supply chains, tariffs, the pandemic and as a specific example when the Evergreen container ship got stuck in the Suez canal five years ago.
It blocked the canal for six days but the broader global supply chain fallout lasted for months afterwards.
Global supply chain disruptions can be challenging, with Mr Timoney noting the implications can be difficult to predict.
“Four years ago when there were huge concerns about whether Europe would have enough gas for the coming winter, that was a big, big issue at the time and people had to put a lot of effort into making sure gas stores could be replenished basically in advance of that,” he said.
Further escalation in the coming weeks, and threats to energy infrastructure could also impact on the future of energy security beyond the war.
“That’s definitely one of the major variables at the moment, that we could see further escalation,” said Mr Timoney.
“It’s been a move towards more escalation this week, other times it’s been a move towards de-escalation. It’s been really hard to follow, everyone’s head is spinning.”
