Oil and gas crisis from Iran war worse than 1973, ​1979 and 2022 together, says IEA

The oil and gas crisis triggered by the blockade of the strait of Hormuz is “more serious than the ones in 1973, 1979 and 2022 together”, the head of the International Energy Agency (IEA) has said, as Donald Trump’s deadline for Iran to reopen the waterway approached on Tuesday.
Fatih Birol, the executive director of the IEA, told Le Figaro newspaper that the impact of the Middle East conflict on the oil market was larger than the combined force of the twin shocks of the 1970s and the fallout from Russia’s invasion of Ukraine.
He also said the countries most at risk were developing nations, which would suffer from higher oil and gas prices, higher food prices and a general acceleration of inflation, while European countries, Japan and Australia would also feel an impact.
Oil traded at more than $110 (£83) a barrel on Tuesday after Trump warned that a “whole civilization will die tonight” unless Iran made a deal.
Brent crude, the international benchmark for oil prices, was up 0.7% at $110.60 a barrel in early afternoon trading in Europe, with New York light crude up 2.5% to $115.17 a barrel.
Investors are growing increasingly anxious as Trump escalates his threats against Iran, demanding that it reopen the strait of Hormuz as part of any deal to stop the war.
The US president posted on his Truth Social site: “A whole civilization will die tonight, never to be brought back again. I don’t want that to happen, but it probably will.”
There were also reports that the US had hit military targets on Kharg Island, the site of a key Iranian oil export terminal.
Daniela Hathorn, a senior market analyst at Capital.com, said: “Markets are once again on edge as the US-Iran conflict enters a critical phase, with investors effectively trading against another countdown clock set by the Trump administration.
“The situation has evolved into a near-term binary outcome: either escalation through direct strikes on Iranian infrastructure, or a last-minute de-escalation that could trigger a sharp reversal in risk assets. For now, the absence of a clear path forward is keeping markets volatile and indecisive.”
The US president, speaking to reporters at the White House on Monday, set a deadline of Tuesday 8pm ET (1am BST Wednesday) for Iran to agree a deal with Washington or face fresh attacks on civil infrastructure, including power plants. “The entire country can be taken out in one night, and that night might be tomorrow night,” Trump said.
He said passage through the strait – a vital shipping channel through which a fifth of the world’s oil and gas supplies normally passes – was a “very big priority” and should be part of any ceasefire deal.
Stock markets in Asia were mixed on Tuesday, with Japan’s Nikkei flat and South Korea’s Kospi rising by 1.1%. Hong Kong’s Hang Seng dropped by 0.7%.
European markets fell after Trump’s latest threat. In London, the blue-chip FTSE 100 share index was down 86 points or 0.84% in afternoon trading. Germany’s DAX fell 0.9% and France’s CAC 40 lost 0.35%.
Wall Street opened lower, with the Dow Jones industrial average dipping by 296 points, or 0.64%, to 46,373.
Markets have been choppy since the US-Israel attack on Iran in February, as the de facto closure of the strait of Hormuz has fed fears around inflation and rattled investor confidence.
On Monday, Kristalina Georgieva, the head of the International Monetary Fund, said the war was likely to lead to higher inflation and slower global growth.
Georgieva told Reuters that before the war began the IMF had expected a small upgrade in its expectation for global growth of 3.3% in 2026 and 3.2% in 2027. Instead, she said, “all roads now lead to higher prices and slower growth”. The IMF is expected to publish its report on the world economic outlook next week.
“We are in a world of elevated uncertainty,” Georgieva said, citing geopolitical tensions, climate shocks, demographic shifts and advancements in technology. “All of this means that after we recover from this shock, we need to keep our eyes open for the next one.”
Drivers in the UK have been hit by the shock. The RAC reported there were “significant fuel price rises” over Easter, with petrol up 2.6p a litre to 157.02p and diesel up 4.2p to 189.42p over the bank holiday weekend.
The Iran war is also pushing the British economy towards stagflation, a poll of purchasing managers at UK companies found. Service sector growth was the weakest in 11 months in March, the data provider S&P Global reported on Tuesday, owing to falling business and consumer spending.
Thomas Pugh, the chief economist at the leading audit, tax and consulting company RSM UK, said: “The inevitable conclusion from this morning’s final PMI numbers for March is that the UK is in for another bout of stagflation, even if the conflict ends soon. If it drags on longer, a recession looks likely.”