HOUSTON – The world’s leading oil and gas executives convened in Houston this week, delivering a stark warning regarding the profound impact of the ongoing conflict in Iran on global energy supplies and the subsequent, far-reaching consequences for the world economy. Gathering for S&P Global’s annual CERAWeek energy conference, industry titans expressed significant concern that current market pricing fundamentally underestimates the true scale of disruption to both crude oil and liquefied natural gas (LNG) flows.
Industry leaders cautioned that a prolonged conflict will inevitably lead to severe fuel shortages across both Asian and European markets. Even if hostilities were to cease, they anticipate oil prices will remain elevated as nations scramble to replenish their critically depleted strategic reserves, signaling a persistent upward pressure on energy costs for the foreseeable future. “You simply cannot remove a staggering 8 to 10 million barrels of daily crude supply and approximately 20% of the global LNG market without incurring significant repercussions across the world stage,” asserted ConocoPhillips CEO Ryan Lance to the assembled CERAWeek attendees, highlighting the immense volumes at stake for global energy investors.
Strait of Hormuz: A Global Economic Chokepoint
The strategic closure of the Strait of Hormuz by Iran effectively imposes an economic chokehold on Middle Eastern oil producers, according to Sheikh Nawaf al-Sabah, CEO of Kuwait Petroleum Corporation. This vital maritime artery serves as the indispensable conduit connecting the Gulf Arab nations’ vast oil exports to international markets. Al-Sabah described this as “an assault not merely against the Gulf region, but an attack that holds the global economy hostage,” forecasting a “domino effect” of escalating costs and disruptions that will ripple across the international supply chain. He emphasized that the financial burdens of this conflict transcend geographical boundaries, ultimately impacting businesses and consumers worldwide.
Independent analyst Paul Sankey of Sankey Research characterized the current energy crisis as the most severe since the Arab oil embargo of 1973, which stemmed from support for Israel in the Mideast war. Sankey, whose career began at the International Energy Agency in 1990, stated, “We have witnessed nothing comparable, perhaps not since 1973. The closure of the Strait of Hormuz is unprecedented.” He underscored the gravity of the situation, noting, “We are currently in a de-facto scenario where Iranian forces control the Strait, rendering the situation exceptionally serious for global oil and gas investing.”
Industry Calls for Enhanced Security Amidst Asset Exposure
These dire warnings from energy sector leadership stand in stark contrast to the Trump administration’s attempts to temper industry anxiety and stabilize volatile oil markets. Energy Secretary Chris Wright acknowledged a “short-term period of disruption” but maintained that the cost was justifiable for the long-term benefit of weakening Iran’s influence. However, for the oil and gas industry, this “cost” translates into significant operational risk and tangible threats to high-value assets. ConocoPhillips CEO Ryan Lance confirmed the company is actively “urging” the Trump administration for robust military protection around its US-owned assets in Qatar, representing hundreds of millions of dollars in investment.
The situation in Qatar has already seen Iran force the cessation of operations at the world’s largest liquefied natural gas (LNG) hub through drone attacks, an facility where ConocoPhillips holds substantial investments. Lance elaborated on the operational challenges, stating, “We have been compelled to evacuate a significant portion of our non-essential personnel. This has proven to be an arduous task over the past few weeks, underscoring the immediate security concerns facing energy companies in the region.”
Oil Prices Reach Three-Year High Amid Volatility
The week saw extreme volatility in crude oil prices, with market fluctuations mirroring shifting hopes for a negotiated peace versus renewed geopolitical tensions. Despite President Donald Trump’s retraction of a threat to bomb Iranian power plants and his consistent claims that Iran sought a deal, investor apprehension prevailed. By Friday, oil prices settled at their highest levels in over three years. Since the US and Israel initiated attacks on Iran on February 28, US crude oil prices have surged an alarming 49% to $99.64 per barrel. The international benchmark, Brent crude prices, has climbed even more dramatically, soaring over 55% to reach $112.57 per barrel.
Shell CEO Wael Sawan cautioned against focusing solely on abstract market discussions. “While discussions about prices are interesting, it is the tangible physical flows that truly matter,” Sawan emphasized. “Our global customers require the actual molecules, the electrons, to power their economies.” Echoing this sentiment, Chevron CEO Mike Wirth pointed out a disconnect, suggesting that the actual physical supply of oil is considerably tighter than what futures market prices indicate. Wirth believes the market’s reactions are currently based on “limited insight” and mere “perception” rather than the underlying physical realities of the energy market outlook.
“There are very real, tangible consequences stemming from the closure of the Strait of Hormuz that are actively propagating throughout the global system, which I believe are not yet fully incorporated into the oil futures curves,” Wirth stated, highlighting the systemic risk for oil and gas investing. Furthermore, Kuwait Petroleum CEO al-Sabah warned that Gulf Arab nations would require a period of three to four months to fully reinstate production, as oil wells had to be shut down due to the Strait’s blockade. ConocoPhillips’ Lance suggested that the “price baseline is poised for a sustained elevation,” indicating that a return to pre-war price levels appears unlikely despite administrative reassurances. Meanwhile, Cheniere, a major global LNG exporter, is striving to meet surging demand from Asian economies heavily reliant on Qatari gas. CEO Jack Fusco noted that the company is already operating at peak capacity. “We are committed to delivering as many molecules as possible to those Asian nations in dire need,” Fusco affirmed. “However, a journey from the Gulf Coast to Asia takes approximately 28 days, so immediate relief is simply not feasible.”
Escalating Fuel Shortages and Global Economic Peril
The disruption extends beyond crude oil, with refined fuel supplies facing an even more critical shortage, according to Shell CEO Wael Sawan. He projected that jet fuel supplies are already impacted, with diesel to follow, then gasoline. This cascading scarcity is rapidly spreading across major Asian economies and is anticipated to reach Europe by April. Governments globally are now proactively fortifying their energy reserves and prioritizing domestic supply security. “We must ensure this does not further magnify what are already severe physical strains on the energy infrastructure,” Sawan warned.
TotalEnergies CEO Patrick Pouyanné revealed that jet fuel prices have skyrocketed by $200 per barrel, while diesel prices have surged by $160 per barrel. China has imposed a ban on oil product exports, and Thailand has resorted to gasoline rationing. “The crisis is now beginning to genuinely impact end-users and customers,” Pouyanné noted. He underscored the critical dependence on the conflict’s duration. “Everything will hinge on how long this conflict persists. I sincerely hope it will not be protracted, otherwise, we face truly dramatic consequences for the global economy and energy security.”
Geopolitical Outlook: Escalation and Enduring Risk
Vali Nasr, an Iran expert at Johns Hopkins University, predicts a prolonged conflict with a high risk of escalation. He suggests Tehran is not seeking a ceasefire with Trump but rather a comprehensive settlement that includes control of the Strait, significant economic compensation, and robust security guarantees. General Jim Mattis, Trump’s former defense secretary, critiqued the US approach, stating that Iran is waging total war while the US conducts a limited air campaign. He deemed the objective of regime change in Tehran as “unrealistic,” asserting that the conflict has reached a stalemate, making further escalation by one side highly probable.
Mattis expressed concerns that the U.S. Navy would face substantial challenges in effectively securing the extensive shipping lanes from the Persian Gulf through the Strait of Hormuz and into the Gulf of Oman, given the hundreds of miles of maritime routes Iran could target. Independent analyst Paul Sankey estimates that this conflict could shatter the prevailing economic paradigm developed by the Gulf Arab nations, potentially leading to a staggering 30% drop in annualized gross domestic product for Iraq, Qatar, the United Arab Emirates, and potentially Saudi Arabia. General Mattis also highlighted that the US did not consult its Gulf Arab allies before engaging in hostilities, emphasizing that the administration cannot unilaterally dictate the conflict’s conclusion. “I do not believe we can simply disengage from this situation,” Mattis concluded, “We are in a challenging position.” Investors must closely monitor these geopolitical developments, as they will continue to dictate the volatile landscape for crude oil prices and broader energy market dynamics.
