Global | The New Geopolitics of the Energy Transition

Summary

On May 28, three months will have passed since the outbreak of the latest conflict involving the United States, Israel, and Iran. The crisis has brought renewed attention to the Strait of Hormuz, the narrow waterway that serves as the sole maritime gateway between the Persian Gulf and the Indian Ocean.

Key points

• Key points:
• Since early March, the strait has remained blocked. Its strategic importance is difficult to overstate: roughly one-fifth of the world's traded oil and natural gas passes through this chokepoint, with no viable alternative sea route.
• More than 80% of the oil transported through the Strait of Hormuz is bound for Asian markets. As supply disruptions have intensified, governments across the region have been forced to respond.
• The repercussions have extended far beyond Asia. Airlines worldwide canceled approximately 13,000 flights in May alone, highlighting the aviation sector's vulnerability to rising energy costs. Jet fuel prices have more than doubled since the conflict began.
• At the same time, geopolitical uncertainty and surging oil prices, rising from around $70 per barrel before hostilities broke out to nearly $120 by late April, have reignited concerns about energy security and accelerated discussions around reducing dependence on fossil fuels.
• Yet these trends also reveal new vulnerabilities. China is estimated to manufacture roughly 90% of the world's solar panels and 80% of its wind turbines and battery systems. Policymakers around the globe have increasingly warned of the risks associated with relying so heavily on a single supplier for technologies that are becoming essential to the future energy system.

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