Fatih Birol, the Executive Director of the International Energy Agency (IEA), highlighted the potential for oil markets to enter a 'red zone' by July or August as global stockpiles deplete and demand increases during the summer travel season. He emphasized that the reopening of the Strait of Hormuz is crucial to mitigate the energy shock caused by the Iran conflict.
Currently, about 20% of the world's oil and liquefied natural gas transit through this strategic waterway, which has seen a significant decline in shipping traffic since the onset of U.S. and Israeli strikes against Iran on February 28. Birol noted that while the market initially had a surplus to absorb the crisis, these reserves are now diminishing.
He expressed particular concern for developing regions in Asia and Africa, which may experience the most severe impacts of the crisis, and warned that restoring Middle Eastern oil production and refining to pre-war levels could take considerable time.
The IEA is prepared to coordinate further strategic oil reserve releases if necessary, following its historic release of 400 million barrels in March to address supply disruptions. This situation underscores the fragility of global energy security and its potential ripple effects on food security as well