As of right now, the Straits of Hormuz are again closed. No matter how this conflict turns out, it has already changed the world.
The very uncertainty of how this conflict is progressing is underlining, day by day, the urgency of a pivot for nations in Asia and the developing world.
President Lee Jae Myung said on the 30th, “Right now, there is chaos worldwide due to energy issues. Frankly, the situation is so serious that I cannot sleep,” and added, “South Korea must swiftly transition to renewable energy.” The president made these remarks during a town hall meeting held at Jeju Halla University that day, stating, “The current situation is concerning, but I fear it will become even more unstable in the future,” and emphasized, “The reality is worse than one might think.” He noted that the instability in energy supply due to the Middle East crisis is more severe than anticipated.
President Lee warned, “Relying on fossil energy is extremely dangerous for the future,” and explained, “We do not produce these resources ourselves, and chasing imports has led to the current crisis.” He continued, “All energy sources must be rapidly shifted to renewables,” and gave examples: “For instance, we should quickly transition to electric vehicles, switch heating to heat pumps, and accelerate the use of abundant wind energy.” Regarding the government’s policy to convert all new vehicles in Jeju to electric cars by 2035, he criticized, “This is too slow for an emergency,” and urged, “Rental vehicles should also be replaced more aggressively.”
There were few signs on Wednesday of a large-scale return of shipping through the Strait of Hormuz, after Iran promised the “safe passage” of vessels in the crucial waterway as part of its cease-fire with the United States.
That could change, experts said, if shipping operators concluded that the terms of making the passage were clear and the risks of attacks were reduced. Global shipping traffic and energy flows could yet take months to return to prewar levels, they added.
Iran has blocked the strait, which carries a quarter of the world’s seaborne oil and one-fifth of its gas, throughout the war by laying mines and launching sporadic attacks on ships.
A Greek-owned bulk carrier and a Liberia-flagged vessel crossed the strait on Wednesday, according to Kpler, a global ship-tracking firm. But there were also “no clear signs yet of large-scale positioning or queuing that would indicate ships are preparing to move through in significant numbers,” said Dimitris Ampatzidis, a senior risk and compliance analyst at Kpler. “Most operators appear to be holding back.”
Asia’s reliance on imported energy means it now sits at the forefront of the global fossil fuel crisis, but supply disruptions are also hitting hard in Europe and Africa, where countries are responding to rising fuel costs and a considerable threat to food security.
The head of the International Energy Agency said the energy transition was moving “very strongly” before the Iran war began — but the fallout from the resulting energy shock means countries will likely direct even more investment toward clean energy sources.
Analysts said a unique component of the fallout from the Iran war is that, unlike in previous oil shocks, renewable power has become more competitive in many countries around the world.
Fossil fuels, however, such as coal, oil and gas, continue to dominate the global energy mix, meeting around 80% of worldwide demand in 2023, according to the IEA.
“The Iran crisis accelerates the shift to renewables and electrification. High fossil prices drive switching, making already cheap electrotech even more competitive,” Sam Butler-Sloss, research manager at global energy think tank Ember, told CNBC by email.
“In the old fossil fuel world, energy security meant diversifying fuel supply. With electrotech, nations now have the tools to increasingly eliminate imported fuels altogether.”
“…meeting around 80% of worldwide demand in 2023, according to the IEA.”
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