Global energy at risk: Lessons from 1973

Amir Handjani’s analysis for Unherd examines how the Third Gulf War, initiated by US President Trump in conjunction with Israel against Iran, is triggering a global energy crisis reminiscent of the 1973 oil shock—but on a far larger, more structurally complex scale.

Many observers instinctively compare today’s crisis to 1973, when Arab members of OPEC imposed a production cut and embargo on the United States and the Netherlands during the Yom Kippur War. Crude prices quadrupled from $3 to $11 per barrel in weeks, gasoline rose 40%, and the US economy slipped into stagflation.

The crisis lasted five months, but its economic and industrial effects endured for a decade. Japan, heavily reliant on imported oil, restructured its economy around electronics and fuel efficiency, while Western nations created the International Energy Agency and strategic petroleum reserves to prepare for future disruptions.

“The comparison with the 1973 oil shock is usually made too quickly and without sufficient precision, it is directionally correct,” Handjani notes, emphasising that the current situation is far more consequential.

Unlike the 1973 embargo, which was a political decision that could have been reversed quickly, today’s crisis stems from a combination of chokepoint closures, damaged infrastructure, insurance market breakdowns, and fields temporarily shutting in. Around 20 million barrels per day transit the Strait of Hormuz—roughly 20% of global oil consumption. Saudi Arabia and the UAE can reroute only 2.6 million barrels per day around the strait, while Iraq, Kuwait, and Qatar have no alternatives.

Since February 28, commercial shipping through the strait has nearly stopped. Tanker traffic dropped 70% initially, then to near zero, as insurance premiums soared.

“The timeline for restoration is weeks at best and months in the most realistic cases,” Handjani warns, noting that damaged infrastructure and reservoir pressures make restarting fields far from immediate. Iraq’s southern oilfields, for instance, have seen production collapse by 70%, from 4.3 million barrels per day to 1.3 million.

The implications extend beyond crude. Liquefied petroleum gas and naphtha, essential for petrochemicals in Northeast Asia, face severe disruptions. As Handjani explains, “When naphtha supply is disrupted, the effects don’t show up at the pump. They show up six to twelve weeks later in the price of a bag of flour, a bottle of cooking oil, a box of cereal.”

LNG exports from Qatar, supplying a fifth of global demand, have been affected by drone strikes, while global spare liquefaction capacity is nearly maxed out, intensifying competition in Asia and Europe and driving up prices.

Current market pricing assumes a rapid normalisation, but Handjani cautions this is optimistic. Brent crude is trading above $106 per barrel. Even with the International Energy Agency coordinating a 400-million-barrel emergency release, analysts note this covers only 15% of the supply lost through Hormuz and takes 60–90 days to impact the market. Iran has already warned to “get ready for oil at $200 a barrel,” while Rystad Energy predicts Brent could hit $135 if the war lasts four months.

Handjani concludes that, as in 1973, the ultimate burden will fall on ordinary consumers: working-class families in Cairo, Karachi, and elsewhere, struggling with skyrocketing energy and food costs.

“Half a century on from the first oil crisis, a narrow passage can still bring the global economy to its knees," the analysis notes. 

By Sabina Mammadli