The head of the International Energy Agency, Fatih Birol, has warned, in a conversation with CNBC, that the disruption triggered by the Iran conflict has evolved into a systemic energy shock, with supply losses on a scale rarely seen and spillovers now spreading across fuels, regions, and industries.
“We are facing the biggest energy security threat in history,” said Birol, outlining a crisis that extends beyond oil into broader commodity and transport systems.
The immediate trigger is the effective shutdown of the Strait of Hormuz, through which around 20 million barrels per day of oil and petroleum products moved before the conflict. The strait is now under what Birol described as a “double blockade,” halting flows at a scale that is difficult to offset through alternative routes.
“As of today, we’ve lost 13 million barrels per day of oil … and there are major disruptions in vital commodities,” he told Steve Sedgwick virtually at CNBC’s CONVERGE LIVE in Singapore, highlighting the magnitude of the supply shock.
The consequences are cascading through the global economy. Oil supply losses of this scale are tightening refined product markets, lifting transport and manufacturing costs, and feeding into broader inflation pressures. Unlike previous disruptions, the current shock is affecting both crude supply and downstream products simultaneously, amplifying its impact.
One of the most acute stress points is aviation fuel. Europe, which relies heavily on Middle Eastern refining capacity, is already facing the prospect of shortages within weeks.
“Europe gets about 75% of its jet fuel from refineries in the Middle East and this is basically now [down to] zero … Europe is now trying to get it from the U.S. and Nigeria. If we are not able to get, in Europe, additional imports from the countries now, we will be in difficulties,” Birol said.
The scramble to secure alternative supplies is reshaping trade flows. The United States and Nigeria are emerging as key suppliers, but logistical constraints, including shipping capacity, refining bottlenecks, and delivery times, limit how quickly those volumes can replace lost Middle Eastern output.
The implication is that shortages may not be evenly distributed. Regions with limited refining capacity or weaker access to alternative supply chains could face sharper disruptions, raising the prospect of uneven economic impact across countries.
“I really hope, first of all, that the strait is opened and refinery exports start from there, but we may well need to take some measures in Europe to reduce air travel as well,” Birol said, signaling that demand management, including potential curbs on flights, is now part of the policy toolkit.
The IEA’s warning also points to a deeper structural vulnerability. Global energy markets remain highly dependent on a small number of transit chokepoints, with the Strait of Hormuz among the most critical. When those nodes are disrupted, substitution options are limited in the short term, even with strategic reserves in place.
The agency has already attempted to stabilize markets by coordinating the release of 400 million barrels from emergency stockpiles among its 32 member countries. While the move has provided temporary relief, officials acknowledge that it cannot resolve the underlying supply deficit.
“This is only helping to reduce the pain, it will not be a cure,” Birol said in earlier remarks. “The cure is opening up the Strait of Hormuz. We are gaining some time, but I don’t claim that this will be a solution, our stock release.”
The persistence of the disruption is forcing a reassessment of energy strategy globally. Birol expects the crisis to accelerate investment across multiple energy sources.
“I expect, first of all, nuclear power, will get a boost … Renewables will grow very strongly — solar, wind and others — [and] I expect electric cars will benefit from this,” he said.
Also, the transition is likely to be uneven. “In some countries, I expect the coal may also see a push and go back up, especially in some big countries in Asia,” he added, reflecting the reality that short-term energy security concerns can override longer-term decarburization goals.
This dual response, accelerating clean energy while reverting to high-emission fuels where necessary, underscores the complexity of the current moment. Governments are being forced to balance immediate supply security against climate commitments, often making trade-offs that would have been politically difficult under normal conditions.
The economic implications are high because sustained high energy prices could dampen global growth, compress corporate margins, and prolong inflationary pressures, complicating central bank policy. For energy-importing regions, the shock acts as a terms-of-trade deterioration, effectively transferring income to producers and straining fiscal balances.
For markets, the crisis is shifting from a volatility event to a structural constraint. Even if oil flows partially resume, the risk premium associated with the Strait of Hormuz is likely to remain elevated, influencing pricing across energy and related commodities.
Birol’s assessment suggests that the world is entering a period of heightened energy insecurity, where geopolitical risk, infrastructure bottlenecks, and the uneven pace of energy transition are converging. The immediate priority remains reopening the Strait of Hormuz.
