Middle East conflict severely damages energy infrastructure, IEA warns

More than 40 energy assets across nine countries in the Middle East have been “severely or very severely” damaged by the ongoing conflict, the International Energy Agency (IEA) warned, potentially prolonging disruptions to global supply chains even after hostilities end, Bloomberg reports.

“Not only oil and gas, but some of the vital arteries of the global economy — such as petrochemicals, such as fertilizers, such as sulfur, such as helium — their trade is all interrupted, which will have serious consequences for the global economy,” IEA Executive Director Fatih Birol said at Australia’s National Press Club in Canberra.

Birol noted that it will take time for damaged oil fields, refineries, and pipelines to come back online. The conflict has effectively closed the Strait of Hormuz, sending crude, natural gas, and fuel prices surging. He added that the disruptions are on a scale equivalent to the 1970s oil crises combined with the 2022 natural gas crisis following Russia’s invasion of Ukraine.

Asia faces particular pressure due to its heavy reliance on crude from the region. Birol also commented on China’s recent decision to curb fuel exports, warning that unilateral restrictions during a global energy crisis could draw criticism. “Every country first looks at its own domestic interest, but in such a situation, to have serious export restrictions without justification, might not be something which gets plus points from the international community,” he said.

To ease supply shocks, the IEA announced in early March that it would release a record 400 million barrels from its emergency oil reserves. Last week, the Paris-based organization proposed additional measures to help energy importers reduce demand. Birol said further releases of reserves remain possible if the conflict continues to disrupt markets.

However, he emphasized that the ultimate solution to the fuel supply disruption lies in reopening the Strait of Hormuz. “With shipping across the Strait at a near-halt, the only true solution to fuel supply disruptions is the reopening of the major trade route,” Birol said.

By Vafa Guliyeva