The International Energy Agency (IEA) warned that the global energy crisis triggered by the war among the United States, Israel, and Iran has worsened to a level exceeding the fallout from the oil shocks and the war in Ukraine.
Fatih Birol, IEA executive director, said in a recent National Press Club address in Canberra, Australia, that "the current energy crisis is more severe than the combination of the oil shocks of the 1970s and the gas shock following Russia's invasion of Ukraine," adding that "global policymakers are not sufficiently recognizing the urgency of the crisis."
He said that the war has severely damaged at least 40 energy assets across nine Middle Eastern countries, placing the world economy under a very serious threat.
The oil shocks Birol mentioned refer to the first and second oil supply crises that broke out in 1973 and 1979, when global oil shortages occurred due to Arab oil producers' weaponization of oil and the political instability following the Iranian Revolution. At the time, international oil prices jumped roughly fourfold and more than twofold, respectively, triggering severe stagflation in which recession and inflation occurred simultaneously.
The energy crisis also deepened during the wartime phase caused by Russia's 2022 invasion of Ukraine. With exports of Russian gas—supplying about 40% of Europe's total gas consumption—effectively halted, natural gas prices in Europe at one point surged more than tenfold, forcing gas-based industries such as fertilizer and steel to stop or cut production, which in turn drove global inflation.
Sensing the urgency, the IEA announced the release of a record 400 million barrels from strategic reserves early this month and is reportedly discussing additional releases with key countries in Asia and Europe.
Birol particularly emphasized the structural nature of this shock and predicted that even if the war ends, it will be difficult for energy markets to normalize quickly. In fact, international oil prices have been on a wild ride recently, showing extreme volatility especially depending on remarks by U.S. President Donald Trump and the situation in the Strait of Hormuz.
On the 23rd (local time), after President Trump hinted at holding cease-fire talks with Iran and put an attack on Iranian power plants on hold for five days, international oil prices plunged by more than 10%. Brent crude, which had been hovering around $114 per barrel, tumbled to $96 per barrel immediately after the hold announcement, sliding rapidly. April West Texas Intermediate (WTI) futures also fell by about 10% from the previous session's close.
The supply-side shock is expected to be even greater. Due to Iran's blockade of the Strait of Hormuz and attacks on energy infrastructure in the Gulf, global crude supply has fallen by about 11 million barrels per day, surpassing the decline during the oil shocks of the 1970s (10 million barrels per day). This is why Birol used the phrase "the biggest energy security threat in history."
The natural gas market is also taking a serious hit. In retaliation for Israel's attack, Iran struck Qatar's Ras Laffan liquefied natural gas (LNG) complex, crippling about 17% of Qatar's LNG export capacity. Qatar is the world's No. 3 LNG exporter and a key supplier to Europe and Asia. Saad Al-Kaabi, Qatar's Minister of energy, said that "repairs could take up to five years."
Meanwhile, as the United States and Iran seek their first face-to-face talks this week on a cease-fire, they are seen as holding the key to the course of this energy crisis.
According to Reuters, Vice President JD Vance, U.S. Middle East envoy Steve Witkoff, and President Trump's son-in-law Jared Kushner are expected to meet with Iranian officials as early as this week in Islamabad, Pakistan, for cease-fire talks. It would be the first face-to-face negotiations between the two countries since the war began on the 28th of last month.
Axios in the United States reported that Mohammad Bagher Ghalibaf, speaker of the Iranian parliament, would be Iran's negotiator, but Speaker Ghalibaf and Iranian authorities dismissed the report as untrue.