The war in Iran and the blockade of the Strait of Hormuz have shaken global energy markets and evoked memories of 2022, when Russia’s attack on Ukraine significantly exacerbated the energy crisis of 2021/22. In the current issue of the Monthly Report, Bundesbank experts examine the differences and parallels between the two energy crises. 

Common features: Applying pressure via the energy supply

In both cases, the energy supply was used as an economic bargaining chip in the wake of military conflict, the report notes. Russia had already cut back its gas supplies to Europe in 2021, i.e. before the attack on Ukraine, in order to gain geopolitical influence. In the current crisis, the Strait of Hormuz has gone from a central route of the global energy trade to a tool for applying geopolitical pressure. As a result, a sharp rise in global energy prices occurred in both situations.

Despite these parallels, considerable differences between the two crises can be seen in their starting points, the energy sources affected and their impact.

Different starting points in the energy markets

Major differences can be seen in the situation in the energy markets before the outbreak of the crises and in their causes, the report states. Global energy markets were already strained before the start of Russia’s war of aggression. The strong recovery in the global economy following the pandemic had caused energy demand to rise. Energy prices had thus already risen significantly in 2021. In addition, Russia cut back its gas deliveries to Europe before the war even began. The Russian invasion of February 2022 exacerbated the situation further, as concerns about further supply shortfalls increased. 

By contrast, before the start of the war in Iraq, oil and gas markets were well supplied and energy prices were significantly lower than at the start of the war in Ukraine. The closure of the Strait of Hormuz and the associated supply shock thus hit the markets while they were in a much more favourable starting position, the experts explain. 

The current crisis is affecting the oil market in particular

Another difference lies in the energy sources affected. While the energy crisis hit the gas and electricity markets in particular in 2021/22, the oil market is the main focus in 2026. The blockade of the Strait of Hormuz has led to a decline in global oil supply of around 11 percent, while gas supply has fallen by just over 2 percent.

Since the start of the Iran war, Brent crude oil prices in March and April have exceeded their pre-crisis level on average by around 60 %, the experts note. Thus, they rose somewhat more strongly than during the crisis of 2021/22. Above all, the potential for a timely de-escalation of the conflict, the favourable starting position and the extensive buffers on the oil market prevented even stronger price swings. 

By contrast, European gas, coal and electricity prices have risen far less sharply in the current crisis than in 2021/22. 

Asian economies particularly affected by the current crisis

The level to which individual regions are affected also differs according to the Monthly Report. The energy crisis in 2021/22 hit Europe above all. The lost Russian gas supplies were difficult and costly to replace here. This is why energy prices rose significantly more sharply in Europe at that time compared to other world regions. 

By contrast, the current crisis is more global. Oil is traded worldwide on a larger scale than gas, which is often transported via pipelines and is thus more regionally bound. 

The blockade of the Strait of Hormuz therefore has an impact on all regions. That said, many Asian economies, which source a large share of their energy imports from the Middle East, have been hit particularly hard by the current crisis, the experts write. The adjustment costs are in all probability particularly high in these economies, and supply bottlenecks may make themselves felt earlier there than in other regions.

Energy price shock in Europe so far smaller than in 2021/22

Overall, the current energy price shock appears to be markedly less broad-based and, at least in Europe, significantly smaller than in 2021/22, the experts continue. This can be seen from various global energy price indices which combine oil, gas and coal price trends. Compared with the period before the war, these rose by between 76 % and 145 % in 2021/22. In the current crisis, the increase has so far been between 43 % and 64 %. Aside from different price developments, one reason for this lower increase is the composition of global energy consumption. Oil accounts for only around 30 %. Other energy sources, which were significantly more affected during the 2021/22 crisis, together account for a larger share.

Further developments as yet unclear

Ultimately, however, the intensity and duration of the conflict will determine the further economic impact, the report concludes. The impact of the energy crisis in 2021/22 lasted for years. The current crisis could remain relatively short-lived if the conflict is de-escalated quickly. However, if the conflict persists and the Strait of Hormuz remains blocked for longer, the situation in global energy markets could become significantly worse and energy prices could see a further distinct rise.