Mid-East war raises threat of energy crisis worse than 1970s oil shocks

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SYDNEY – The world faces an energy crisis worse than both the 1970s oil shocks combined if the Middle East war drags on, the head of the International Energy Agency (IEA) warned on March 23, as Israel launched fresh strikes on Tehran and threatened weeks more of fighting.

As the war grinds into its fourth week, US President Donald Trump threatened to “obliterate” Iranian power plants if Iran fails to reopen the Strait of Hormuz within 48 hours, setting an effective deadline of 2344 GMT on March 23 (7.44am on March 24, Singapore time).

Tehran has retaliated against US-Israeli assaults by throttling traffic in the vital waterway, conduit for a fifth of global crude oil, and hitting energy sites and American embassies across the Gulf, as well as firing missiles and drones at Israel.

The Islamic republic issued a firm response to the fresh ultimatum, with Parliament Speaker Mohammad Bagher Ghalibaf vowing vital infrastructure across the region will be “irreversibly destroyed” if Mr Trump acts on his threat.

In a stark warning over what lies ahead unless the fighting ends soon, IEA chief Fatih Birol said the world was losing more oil each day than the combined impact of both the 1970s oil shocks and Russia’s invasion of Ukraine.

“This crisis, as things stand, is now two oil crises and one gas crash put all together,” he said. “No country will be immune to the effects of this crisis if it continues to go in this direction.”

He added: “The global economy is facing a major, major threat today and I very much hope that this issue will be resolved as soon as possible.”

At least 40 energy assets across the oil- and gas-exporting region have already been “severely or very severely damaged”, Mr Birol said, with oil prices driven above US$100 a barrel over supply fears.

In recent days, Iran has allowed a handful of vessels from countries it considers friendly to pass through the Strait of Hormuz, but warned it would block ships from nations joining the “aggression” against it.

Oil prices rose again on March 23, while stocks tumbled after Mr Trump and Iranian leaders traded threats, and Israel said the Middle East war could last several more weeks.

In a further sign of the real-world impact far beyond the region, a major Cambodian energy supplier said it would stop sales of liquefied petroleum gas due to war-linked supply disruptions.

‘Weeks’ more fighting

China’s Foreign Ministry in Beijing warned that Mr Trump’s latest threats would further fighting risks, creating an “uncontrollable situation” in the Middle East.

The US President offered varying timelines and objectives for the war, saying on March 20 he was considering “winding down” the operation, only to later threaten attacks on Iran’s power plants.

Israeli Prime Minister Benjamin Netanyahu has spoken of a long-term campaign against Iran’s government, a state sponsor of Hamas, which launched the Oct 7, 2023, attack against Israel, triggering the war in Gaza.

Israel launched fresh strikes on Iran on March 23, with one journalist witnessing a thick column of black smoke rising above Tehran, while its military urged people to take over as it worked to intercept missiles fired from Iran.

Israel has also expanded its ground campaign against Iran-backed Hezbollah in Lebanon, warning of “weeks of fighting” in the country.

The violence in Lebanon has killed more than 1,000 people, according to the Health Ministry, with more than a million displaced.

Israeli forces were given orders to destroy bridges they said were used by Hezbollah to cross the key Litani river, 30km north of the border, in what Lebanese President Joseph Aoun called “a dangerous escalation” seen as a prelude to a ground invasion.

Iran takes toll in Israel

Israel prides itself on its air defences, and Mr Trump and Mr Netanyahu both claim to have knocked out key Iranian military sites.

But Iranian missiles evaded the defences over the weekend to land in two southern towns, including Dimona, close to Israel’s desert nuclear facility, injuring dozens on March 21.

“We thought we were safe,” Mr Galit Amir, a 50-year-old care provider, said in Dimona. “We didn’t expect this.”

According to rescuers, a missile landed about 5km from what is widely believed to be the Middle East’s only nuclear arsenal, although Israel has never admitted to possessing nuclear weapons, insisting the site is for research.

Iran said it was retaliating against a hit on its own nuclear site at Natanz, but Israel’s military said it was “not aware of a strike”.

In Iran, at least 3,230 people have died in the war, including 1,406 civilians, according to the US-based Human Rights Activists News Agency. AFP