The U.S.-Iran war entered an all-out energy conflict with no limits after peaking on the 18th of last month, when Israel struck Iran’s South Pars gas field and Iran retaliated by attacking Qatar’s Ras Laffan liquefied natural gas (LNG) facility. With the war now stretching beyond a month and a severe global energy crisis deepening, countries are resorting to desperate measures including electricity rate hikes and a return to coal-fired power.
According to the International Energy Agency (IEA) and international media reports on the 4th (local time), daily oil transit through the Strait of Hormuz reached up to 20 million barrels in 2024 but is now estimated at below 2 million barrels. The IEA noted that transit has effectively been halted. The shortfall exceeds three times the supply deficit of approximately 5 million barrels caused by the two oil shocks of the 1970s. The reduction in LNG volume amounts to approximately 140 billion cubic meters, nearly double the 75 billion cubic meters lost immediately after the Russia-Ukraine war in February 2022.
Since President Trump’s announcement of a full-scale offensive against Iran on the 2nd, attacks on energy facilities in the Middle East have intensified further. A recurring pattern has emerged in which previously struck sites are attacked again to prevent restart operations. Iran’s Bushehr nuclear power complex, struck by U.S. and Israeli forces on the 4th, has been hit for the fourth time since February 28. The Habshan gas facility in Abu Dhabi, UAE, was also attacked by Iran on the 3rd — its second strike. On the same day, Iran attacked Kuwait’s Mina al-Ahmadi refinery for the second time since mid-last month. Repeated second and third strikes on the same targets compound facility damage and further extend the time required to restore energy operations.
With no clear energy stabilization plan in sight, restoring Middle Eastern energy facilities is expected to take years. Qatar’s Ras Laffan LNG complex, struck by Iran, is estimated to require approximately five years for damage repair.
For the Strait of Hormuz, removing the mines that Iran claims to have deployed is expected to take a considerable period. Mine clearance is a high-risk operation requiring unmanned submarines or divers to neutralize each device individually. The strait’s complex tidal currents make detecting small mines extremely difficult. Crude oil stockpiles face similar challenges. Prolonged storage allows water, sediment, microorganisms, and oxygen to mix in, causing thick sludge buildup on tank floors and degrading quality to levels that can disrupt refining processes.
As a result, countries that had been relying on strategic petroleum reserves are now shifting to painful measures such as electricity rate increases and consumption cuts. Japan’s government has reportedly begun reviewing demand suppression measures including energy conservation. Egypt, which depends on gas-fired power for 80% of its electricity, has decided to raise electricity rates this month by 20% for commercial users and 16% for some residential users.
In Europe, discussions of a windfall tax on energy companies have resurfaced. Finance ministers from five countries — Germany, Italy, Spain, Portugal, and Austria — recently urged the European Union’s European Commission to impose an excess profit tax on energy companies. They argue that energy firms reaping windfall gains from the war should be taxed to fund consumer relief. European gas prices have surged more than 70% since the war began on February 28.
Coal, whose use had been declining under low-carbon policies, is also enjoying a resurgence as an alternative energy source. According to the U.K.’s Guardian, the Indian government has ordered its coal-fired power plants to maintain maximum utilization rates. Thailand and Bangladesh have also raised coal plant utilization to maximum levels. Japan, which depends on the Middle East for more than 90% of its crude oil, has launched an emergency measure this month to temporarily allow aging coal-fired plants — previously restricted on environmental grounds — to operate for one year. South Korea’s government has also lifted the cap on coal-fired power generation. Samantha Dart, co-head of global commodities research at Goldman Sachs, said, “Asian countries that have no alternative to Middle Eastern LNG could depend on coal for a longer period.”
Over the longer term, the emergence of Middle Eastern energy pipelines that bypass Iran and the rise of energy-producing nations outside the Middle East are anticipated. Egypt, which controls the Suez Canal, is positioned to benefit by providing alternative logistics services to transport Saudi crude oil to the Mediterranean. Flows through the SUMED pipeline — running from the Gulf of Suez across Egypt to the Mediterranean coast — are also expected to increase. African countries such as Algeria, which have been exporting LNG to Europe, are eyeing windfall gains from the Iran war. India’s government is also accelerating energy self-sufficiency by building and expanding natural gas infrastructure. If energy supply routes diversify over the long term, the existing energy hegemony centered on the United States and the Middle East is likely to weaken.