International Think Tanks: What Does a War with Iran Mean for the Global Energy Market?

Introduction

The sudden outbreak of war in the Middle East Gulf region has introduced significant new risks to global energy security. The conflict has damaged oil and natural gas facilities in the Gulf, threatening shipping through the Strait of Hormuz, which has nearly paralyzed maritime traffic and disrupted oil and LNG exports. As the crisis continues, reports of oil fields and LNG export facilities shutting down are increasing. On Friday, March 6, international Brent crude prices surged past $92 per barrel, up 28% from last Friday’s close. Prolonged shipping disruptions and/or severe damage to export facilities could lead to sustained sharp increases in oil prices. Think tank experts from the Center for Strategic and International Studies (CSIS) assess the impact of this conflict on the global energy markets.

1. Kevin Book: A Pivotal Moment in Global Energy History

Kevin Book, Senior Advisor at CSIS, Energy Security and Climate Change Program

This is no longer the oil market of our grandparents’ era. For decades, geopolitical turmoil has repeatedly disturbed markets, keeping strategic analysts awake at night, but the resulting oil price increases have always fallen short of expectations. However, the potential closure of the Strait of Hormuz is truly disruptive—most analysts previously predicted a daily surplus of over 3 million barrels in the global liquid fuels market this year, but in reality, there is a deficit of about 20 million barrels per day.

In fact, the reason the world has not yet fallen into a full-blown energy crisis is due to two key supports: a long-term supply-demand rebalancing pattern and ample pre-crisis inventories, especially contributed by shale oil regions. Data from the U.S. Energy Information Administration shows that from 2008 to 2025, U.S. liquid fuel production accounts for 70% of the global supply increase; non-OPEC producers in the Western Hemisphere such as Argentina, Brazil, Canada, and Guyana have also recently increased supply. But caution is needed: past production growth potential is limited, and if existing capacity is constrained long-term by this ongoing geopolitical conflict of unknown duration, supply resilience will further diminish.

On the demand side, structural changes are equally important. According to combined data from the Energy Research Institute and the World Bank, over the past 25 years through 2024, global oil intensity of real GDP has decreased by about 36%. This decline is mainly due to improved energy efficiency and economic diversification, providing a valuable buffer against energy shocks. However, this buffer is not unlimited: if the Strait of Hormuz shipping cannot be restored quickly, accumulated economic pressures will eventually be released, and while markets may eventually rebalance supply and demand, the cost will likely be a sharp rise in oil prices.

The limitations of energy substitution further complicate this crisis. Different energy sources have clear substitution boundaries: for example, without widespread adoption of plug-in hybrid vehicles, electricity cannot effectively replace oil consumption in transportation. The 2022 energy landscape shifts offer important reference points: sanctions on Russia and the Nord Stream gas pipeline disruptions reduced Russian gas exports by about 20% (5% of total exports), triggering regional energy substitution chains—most notably, LNG cargoes from Asia shifted to Europe to fill gaps, forcing Asian power plants to increase oil-based fuel consumption. Historically, disruptions in the Strait of Hormuz are likely to trigger similar substitution effects, such as increasing coal-fired power plant utilization in Asia, leading to a “passive transfer” of energy consumption.

This chain reaction will also influence future energy investment strategies. For energy-import-dependent economies, U.S. LNG from all 48 states may once again become a strategic focus; simultaneously, developing domestic power generation capacity (short-term renewable energy expansion, long-term nuclear energy deployment), and accelerating electrification of end-use sectors will become new priorities. The depth and scope of such investment adjustments are clearly correlated with the duration and scale of the crisis—this “energy aftershock” from the Strait closure is reshaping the underlying logic of global energy strategies.

2. Adi Imseirovic: No Signs of Panic in the Oil Market

Adi Imseirovic, Senior Research Fellow at CSIS, Energy Security and Climate Change Program

Despite clear risks to export facilities and shipping in the Strait of Hormuz, Brent crude prices only barely touched $90 per barrel—far beyond market expectations. Most observers previously predicted that such geopolitical shocks would push prices above $100 per barrel. Even more intriguing is the forward curve: the January 2027 delivery contract has consistently hovered around $70 per barrel.

What is the underlying logic behind this “near-strong, far-weak” price structure? Is the market underestimating the potential risks of long-term conflict?

In fact, the market has already priced in the risk premium of military escalation. A week before the first attack, Brent prices had risen from just above $60 to over $70 per barrel, with risk factors gradually accumulating before the conflict erupted. After Iran attacked energy facilities and threatened to block shipping through the Strait, the Brent spread from June to December widened from $3.50 to $9 per barrel, reflecting a significant increase in the scarcity premium for immediate delivery.

Why, then, are front-end prices so volatile while the back end remains stable around $70? The core reasons are threefold:

First, the market expects a “surplus” of global oil supply this year. Production from the Americas—U.S., Brazil, Guyana, Canada—continues to increase, enough to offset weak Chinese demand, providing a structural cushion that supports forward prices.

Second, global strategic reserves are ample, providing a risk buffer. OECD emergency stocks can cover at least 90 days of consumption; China’s oil inventories are even larger, estimated to support over 110 days; U.S. Strategic Petroleum Reserve (SPR) holdings exceed 400 million barrels, which, at current consumption rates, can cover about 125 days of supply. These ample reserves effectively alleviate long-term shortages concerns.

Third, the core market contradiction is not “oil shortage,” but the “loss of safe shipping routes” in the Persian Gulf. The Strait of Hormuz, over 20 km wide, is difficult to block entirely, but geopolitical risks have increased shipping uncertainty, raising short-term costs. The solution involves providing sufficient war risk insurance—ideally combined with patrols (though the likelihood of this is low)—to mitigate logistical bottlenecks, restore shipping flow, and ensure stable oil supplies.

In summary, although prolonged geopolitical conflict may cause short-term oil prices to rise, market mechanisms are self-correcting. Short-term volatility is not irrational panic but a dynamic rebalancing of risk premiums; in the long run, supply resilience, ample inventories, and the solvability of shipping issues suggest that sustained shortages are unlikely, and excessive worry is unwarranted.

3. Sarah Emerson: Factors That May Shorten the Duration of the War

Sarah Emerson, Senior Fellow, Energy Security and Climate Change Program

Recent attacks and sabotage in the Arabian Gulf send strong signals of escalating risks. Fires at Ras Laffan and Ras Tannura facilities, reduced shipping through the Strait of Hormuz, and other incidents have pushed oil prices higher. While deliberate attacks or accidents could still cause significant casualties and infrastructure damage, multiple structural factors suggest the current conflict’s intensity is unlikely to be sustained long-term, potentially shortening its duration.

Iran’s current strikes lack long-term sustainability. The actual damage to energy infrastructure has been limited, indicating that these facilities may not be Iran’s primary targets. Strategically, Iran’s actions seem focused on expanding attack scope—targeting airbases, embassies, hotels, and other locations with U.S. personnel. Reports indicate Iranian commanders have high autonomy to choose targets and initiate strikes without centralized coordination. This “decentralized” approach can temporarily amplify conflict but also results in scattered, fragmented attacks that are less likely to generate sustained high-intensity pressure, thus constraining escalation potential.

Disruptions to energy transportation are exerting a significant counter-pressure on Iran. In the short term, the U.S. is unlikely to experience direct impacts from the Strait of Hormuz closure; however, Iran’s key trading partner—China—will face immediate reductions in oil supplies, prompting China to call for the reopening of the Strait. Iran’s own energy export system faces rigid constraints: its floating storage capacity is about 155 million barrels, roughly 100 days of exports, serving as a buffer against short-term supply shocks. But given the geographic distance to China and other major markets, these inventories require regular replenishment. A long-term closure of the Strait or retaliatory strikes damaging Iran’s oil infrastructure could cut off its export channels, severely impacting its economy—acting as a key constraint on Iran’s willingness to escalate conflict further.

4. Rad Alkadiri: After the Storm, OPEC+ Faces Turbulent Waters

Rad Alkadiri, Senior Fellow (Non-Resident), Energy Security and Climate Change Program

By 2025, OPEC+ will face significant challenges in market management. Core producers like Saudi Arabia are under increasing fiscal pressure, while U.S.-Israeli military actions against Iran and Tehran’s retaliations are distorting short-term supply-demand balances, complicating an already complex market.

Notably, the immediate impact of supply shocks has overshadowed long-term demand risks, creating a “double overlay” of uncertainties for OPEC+ this year. Several key issues remain unresolved: Will the global economic recovery continue to slow, suppressing energy demand? Can countries quickly replenish strategic reserves after use to prevent supply-demand imbalances? Will price surges prompt non-OPEC producers to accelerate investment, further squeezing OPEC+ market share? Will the U.S. demand compensation for war costs through oil or financial means, reshaping global energy trade? These are some of the challenges OPEC+ will face once conflict subsides and exports resume.

In terms of strategy, OPEC+ is likely to continue its current short-term market management—adjusting supply dynamically to prevent steep price declines. This approach benefits from internal shifts: the diminishing disruptive influence of traditional “difficult” members like Russia, Venezuela, and Iran, which provides OPEC+ with more room for coordinated action. Since 2023, OPEC+ has frequently used production cuts and increases to stabilize markets, with plans in August 2025 to boost output by approximately 548,000 barrels per day to regain market share lost to non-OPEC producers.

However, market volatility remains inevitable. Even if geopolitical conflicts quickly end, oil prices are expected to stay highly volatile in the coming months—evidence from Brent’s price dropping from $68.33 to a low point and then rebounding to $73 within a short period. If conflicts escalate into long-term chaos, with violence and instability lasting months or years, volatility will intensify, and short-term predictability will decline sharply.

Furthermore, OPEC+’s room for maneuver is increasingly constrained: on one side, non-OPEC producers are expanding capacity, adding about 1 million barrels per day to global inventories daily; on the other, signals from the U.S. government suggest easing some sanctions to stabilize prices, potentially disrupting OPEC+’s supply management. In 2026, this complex interplay of geopolitical tensions, fiscal pressures, and market competition will fully test OPEC+’s ability to manage markets and coordinate effectively.

5. Ben Cahill: Collateral Damage in Qatar’s LNG Industry

Ben Cahill, Senior Fellow, Energy Security and Climate Change Program

Qatar, despite its small land area, is a global LNG giant—accounting for nearly 20% of the world’s LNG production in 2024—and has long maintained a reputation for stable supply. Its LNG industry has been built on “reliable supplier” branding, leveraging economies of scale and delivery stability, making Qatar a key partner in energy security, especially in Northeast Asia. QatarEnergy (Qatar Petroleum) has played a dominant role in negotiations, insisting on long-term contracts linked to oil prices and strict destination restrictions. Despite some buyers’ concerns over these terms, many have renewed contracts, cementing Qatar’s unique market position.

This confidence is supported by Qatar’s expanding supply capacity. The International Energy Agency (IEA) forecasts that phased expansion of the North Field will contribute about 21% of the global LNG supply increase by 2030—though delays have occurred, the long-term capacity growth remains significant.

However, Qatar’s near-perfect delivery record is now threatened by uncontrollable geopolitical conflicts. On March 2, QatarEnergy’s Ras Laffan LNG facility was attacked by drones, forcing a shutdown; on March 4, the company declared force majeure. Even if operations are safely resumed, full recovery could take weeks or longer—this incident directly impacts Qatar’s core brand of “absolute stability.”

Market implications depend on the duration of supply disruptions: short-term (within 1 month), a disruption of about 7 million tons of LNG (roughly 1 month’s supply) is manageable; longer disruptions (over 1 month) could cause fundamental market shifts: the anticipated LNG oversupply cycle in 2025 would vanish, spot prices would quickly reflect tight supply, and global LNG trade would re-balance.

The supply gap is difficult to fill quickly. As the world’s second-largest LNG exporter, nearly 80% of Qatar’s 2024 exports go to Asia—including long-term contracts with India, Pakistan, and many spot market participants. Continued reductions would trigger chain reactions: supply shortages for South Asian buyers, increased competition in spot markets, and especially severe impacts on Europe—whose gas inventories are only about 30% full—making upcoming summer critical for replenishment. A supply interruption from Qatar would heighten Europe’s winter energy security risks.

For global LNG buyers, this crisis underscores the importance of “supply diversification.” Long-term, buyers have incorporated risk factors into their sourcing strategies, with major energy companies diversifying supply sources to hedge against price and operational risks. The escalation of Gulf conflicts exposes vulnerabilities in importing LNG from Qatar, UAE, Oman, and other Middle Eastern countries—transportation security risks and geopolitical uncertainties are nearly impossible to fully mitigate within long-term contracts. In contrast, LNG from the U.S., Australia, and Africa, benefiting from more stable geopolitical environments, is increasingly attractive for long-term supply chain resilience. The global LNG market is on the cusp of a significant reconfiguration.

Conclusion

The sudden outbreak of war in the Gulf region has disrupted global energy markets in a transformative way. The paralysis of Strait of Hormuz shipping and damage to energy infrastructure have triggered a chain reaction—Brent crude prices surged 28% to $92 per barrel, daily global liquid fuel supply deficits reached 20 million barrels, and LNG supply disruptions from Qatar and others have extended energy security risks from oil to natural gas. Despite intense short-term shocks, markets have not descended into irrational panic.

However, multiple structural constraints—limited long-term escalation capacity, Iran’s export dependencies, and decentralization of attacks—limit the potential for prolonged conflict escalation. The broader significance lies in reshaping the global energy landscape: OPEC+ faces challenges from geopolitical conflicts, fiscal pressures, and external interventions; the risks in Middle Eastern supply chains are now fully exposed, prompting accelerated diversification efforts. Non-Middle Eastern producers like Australia and the U.S. are gaining competitiveness, while renewable energy and nuclear power, along with end-use electrification, are becoming new strategic priorities. The global energy system is entering a phase of deep transformation centered on security and diversification.