IEA flags mounting energy security risks as Iran conflict threatens global oil flows

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The International Energy Agency (IEA) has warned that escalating tensions involving Iran are increasing risks to global energy security, with concerns centred on potential disruptions to key oil transit routes and critical energy infrastructure across the Middle East.

According to the agency, the deteriorating geopolitical situation has heightened uncertainty in international oil markets, particularly around the Strait of Hormuz and the Bab el-Mandeb Strait, two of the world's most strategically important maritime chokepoints for crude oil and refined petroleum shipments. Any sustained disruption to these corridors could significantly impede global energy trade.

Despite the heightened risks, the oil market has so far demonstrated resilience, supported by alternative supply channels and shifts in global demand. Major Gulf producers, including Saudi Arabia and the United Arab Emirates, have redirected sizeable crude volumes through export routes that bypass the Strait of Hormuz, helping to maintain supply continuity.

Additional exports from the United States, Brazil, Venezuela and Kazakhstan have also offset part of the supply risk, while China's crude oil imports have reportedly fallen sharply from pre-conflict levels, easing pressure on global demand.

The IEA further noted that coordinated releases from strategic petroleum reserves have strengthened the market's ability to absorb supply shocks. Since announcing a collective emergency response on 11 March, member countries have released around 290 million barrels from emergency stockpiles, with more than 1 billion barrels still available under government control if market conditions deteriorate further.

However, IEA Executive Director Fatih Birol cautioned that these emergency measures should not be viewed as a long-term safeguard. As geopolitical tensions persist and commercial oil inventories continue to decline, the market's existing buffers could gradually erode.

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The agency highlighted that the more immediate challenge has shifted from crude oil availability to refined fuel supply. Refinery operations have recovered at a slower pace than crude production, tightening supplies of diesel and gasoline. Continued shortages could increase transport costs, add to inflationary pressures and raise energy bills for households and businesses.

The IEA also stressed the need to maintain uninterrupted navigation through the Strait of Hormuz, describing it as critical to global energy security. While natural gas markets have remained comparatively resilient — supported by stronger liquefied natural gas (LNG) exports from the United States — the agency warned that any prolonged disruption to LNG shipments from the Gulf could tighten global gas supplies and intensify competition between Europe and Asia for available cargoes.

Overall, the IEA said that although diversified supply sources and strategic reserves continue to provide a short-term cushion, an extended conflict or further damage to regional energy infrastructure could pose a significant threat to the stability of global oil and gas markets.

Rising geopolitical uncertainty in the Middle East could also have downstream implications for petrochemical markets. Higher crude oil and refined fuel prices would increase feedstock, production and transportation costs, potentially pushing up prices for a range of oil- and gas-derived chemicals.

Products such as ethylene, propylene, benzene, toluene, xylene, methanol, polyethylene (PE), polypropylene (PP), polyvinyl chloride (PVC), styrene and mono ethylene glycol (MEG) are particularly exposed to changes in energy costs. Sustained increases in diesel prices and freight rates could further raise logistics expenses across global supply chains.

While emergency oil reserves and diversified export routes may help moderate short-term price volatility, prolonged geopolitical instability is likely to keep energy-intensive petrochemical markets on a firmer pricing trajectory.

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