TEXAS – The global economy faces a renewed challenge if the conflict that’s choked the Strait of Hormuz isn’t resolved in a matter of weeks, said International Energy Agency executive director Fatih Birol.
“Markets are nervous” and grappling with “big uncertainty” due to an escalation of attacks from both sides that threatens to disrupt shipments of oil, fertiliser, natural gas and other cargoes through the key waterway, Birol said in an interview on the sidelines of the Aspen Security Forum in Colorado on July 15.
Visible traffic through the strait has thinned markedly over the last week as vessels were attacked and the United States reimposed its blockade of Iranian shipping. Saudi Arabian oil loadings from inside the Persian Gulf have slumped in the wake of strikes on supertankers, while the International Maritime Organization has said the waterway remains too dangerous for commercial vessels to transit.
“If the Strait of Hormuz remains closed we may again have some difficulty for global economies, including those in the region and developing nations and Asia,” Birol said. “It is not months, it is weeks” after which the strait needs to be “fully open, unconditionally open,” he said.
Although the disruption to Persian Gulf energy and feedstock deliveries has impacted economies such as South Korea and Japan, countries like Bangladesh, Pakistan and India are far more vulnerable to such cutoffs, Birol said.
Pakistan bought its most expensive liquefied natural gas (LNG) spot shipment in four years, as renewed hostilities around the strait disrupted contracted deliveries from its main supplier Qatar.
State-owned Pakistan LNG purchased a cargo for July 21-22 delivery at around US$20.70 per million British thermal units via a tender that closed on July 15, according to traders with knowledge of the matter. That’s the priciest LNG purchase for the South Asian country since 2022.
Pakistan was forced to buy the shipment because a planned delivery from Qatar was cancelled due to the disruptions in Hormuz – a key conduit for about a fifth of global LNG supply. This is the fourth cargo Pakistan purchased from the spot market for July delivery, as Islamabad scrambles to stave off a gas crunch and energy shortage.
Asian LNG prices have surged in July after the US and Iran resumed attacks in the Middle East. Gas flows through Hormuz have dropped since a Qatari tanker was attacked last week, forcing some buyers to rush to find replacement supply. BLOOMBERG
