The US-Israeli war on Iran will have a profound impact on the global energy markets. It has already sent the price of the benchmark Brent crude oil soaring to nearly $120 per barrel, close to its highest point of $147 recorded in July 2008.In 2022, after Russia’s invasion of Ukraine, Brent crude also spiked, reaching $139 per barrel in March, before stabilising at roughly pre-war rates the following year. The price of natural gas also registered a peak in 2022, and so it has this month, as a result of the attacks on Iran and the closure of the Strait of Hormuz.Some may point to the energy shock of the Russia-Ukraine war and argue that the Iran war will follow the same pattern: a temporary shock and eventual market normalisation. But that is unlikely to be the case. Yes, oil and gas prices will eventually stabilise, but that would come at a much higher economic cost for the region and the world.A chokepoint and no alternativesThe 2022 energy shock was primarily driven by the sanctions and price caps that European countries and the United States imposed on Russia. This pushed large volumes of oil into alternative trade routes and cut off most of the Russian pipeline gas supply to Europe. This resulted in the …
