Iran war undermines trust in Hormuz transit: IEA’s director Birol

[VIENNA] The reputation of the Strait of Hormuz as a reliable artery for global energy trade may be permanently damaged by its prolonged closure, said International Energy Agency (IEA) executive director Fatih Birol.

Even if movement is restored, “the vase has been broken. You can’t glue it back together”, he added, warning that the disruption has undermined confidence in what was once one of the world’s most critical oil and petrol choke points.

“If it was once closed, it can be closed again.”

Speaking to reporters in Vienna, ahead of a meeting with Haitham Al Ghais, secretary-general of the Organization of Petroleum Exporting Countries, Birol reiterated the historic nature of the current upheaval in global energy markets.

“We are going through a historical period in terms of energy, foreign policy and geopolitics,” he noted. “The world is going to understand very soon that it has devastating consequences for our economy.”

The double blockade by the US and Iran of the waterway – which handled about a fifth of the world’s oil and liquefied natural gas flows – has had consequences far beyond energy markets. Everything from farm inputs to air travel has been impacted.

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The continued trade disruption risks pushing oil and petrol prices even higher, Birol said. “That could have significant implications on inflation numbers and cut economic growth in many countries.”

Ultimately, the solution lies beyond energy markets, he concluded. “The solution to this problem doesn’t go through the energy sector, but through diplomacy.” BLOOMBERG