Hello Power Up readers,
The U.S.-Iranian standoff continues and peace negotiations remain elusive after President Donald Trump extended the ceasefire indefinitely on Tuesday. The Middle East standoff centers on the double blockade of the Strait of Hormuz, which has left the region and global markets in a tense holding pattern.
Both sides upped the ante in recent days, with the seizure of several Iranian ships and tankers by U.S. forces and Iran’s capture of two ships in the vital waterway.
With around 13% of global oil supplies and a fifth of liquefied natural gas supplies stranded in the Gulf – and hopes for an imminent reopening of the strait fading – Brent crude prices jumped back above $100 a barrel.
The stress on economies also continues to spread. In Europe, German airline Lufthansa cancelled 20,000 flights over the coming months due to jet fuel shortages. Meanwhile, the European Union is considering measures to deal with fuel shortages and higher energy costs. Demand for rooftop solar systems across Europe has also surged.
The spike in energy prices and supply shortages have crushed global oil consumption, sending it plummeting by 4 million barrels per day, or 4%, since the start of the conflict, according to some estimates.
But even though the impact of the acute crisis is deepening each day the Strait of Hormuz remains closed, the long-term impact of the crisis may, paradoxically, work in oil’s favour, as I wrote about earlier this week.
If all this makes for grim reading, just remember that things can always get worse. The Iran war marks the latest in a quick succession of energy shocks this decade, which could well become the norm going forward. More on this below.
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