Resilience and recovery: navigating a new era of global energy security

The resilience of the global energy system, energy security and supply strategies will be in the spotlight for the foreseeable future as the war in Iran sends global energy prices soaring. With the Middle East conflict running through its second week, the focus of the global energy ecosystem has moved from immediate market shocks to a more fundamental assessment of global energy resilience, according to a panel of global energy experts who took part in a recent webinar  organised by Energy Connects.

With the Strait of Hormuz at a near-total standstill and approximately 25% of global oil and LNG flows at risk, the widening of the Middle East conflict signal the return of the geopolitical risk premium to the forefront of market pricing, according to the panel, which comprised Simon Flowers, Chairman and Chief Analyst of Wood Mackenzie, Joseph McMonigle, President & CEO of the Global Center for Energy Analysis and former Secretary General of IEF, and Gaurav Sharma, energy analyst and Energy Connects columnist.

A Strait under siege

“This is a global issue with both substantial volumes, about 15% each of gas and oil volumes disrupted. The key to the supply disruption that we are seeing is really how long the disruption lasts. I think the outcome is quite binary – if somehow the Strait of Hormuz reopens quickly, we might get oil and then later gas beginning to flow,” said Flowers. “As we are seeing this week how volatile prices are… the forward markets and prices will move quite swiftly to adjust to that. Actual physical supply, getting [the oil] going is a different matter,” he added.

Highlighting that the market has reacted with unprecedented price whiplash, the panel discussed how in a 24-hour window, Brent crude surged toward $120 a barrel before diving below $80 amid conflicting reports of naval escorts. This $40 spread underscores a market driven by sentiment rather than a physical lack of crude, they said.

The resiliency playbook

“The Strait of Hormuz is 20% of the world’s crude supply and so that is a significant issue that needs to be addressed,” said McMonigle.

“I think 2026 is going to go down as the year of energy security, and, we have seen countries before [the start of the war] take very proactive measures to build resiliency. I’m talking about Saudi Arabia here: it's amazing that they are now using this East-West Pipeline that they weren’t using a couple days ago, and now it’s allowing 7 million barrels per day of flow-through. So, they’ve built resiliency, the UAE has this other pipeline. I do think that one of the lessons here is that you will see a lot more of these types of resiliency measures being employed both in the oil and in the LNG sector as well.

“We have to be a little humble here, because nobody really knows how things are going to transpire, and instead of forecasting, I feel like we’re play-by-play announcers, because the situation changes on a daily and hourly basis,” he added.

Despite the chaos, the panel highlighted significant mitigation measures that did not exist in previous decades.

• Alternative routes: Saudi Arabia’s East-West pipeline is currently allowing 7 million barrels per day (bpd) to bypass the Strait, while the UAE’s Habshan-Fujairah pipeline remains a critical release valve.
• The historic SPR release: The IEA and G7 have coordinated to announce the largest Strategic Petroleum Reserve (SPR) release in history – roughly 400 million barrels, which is double the volume released during the initial Russia-Ukraine conflict.
• The China factor: China has spent years building a massive reserve, estimated between 1 billion and 1.4 billion barrels, providing a buffer that could take significant pressure off global demand.

While Europe and North America can pivot to West African or North Sea supplies, Asian economies are in a “real bind,” according to Sharma. For the Big Four – China, India, Japan, and South Korea – replacing Gulf crude means doubling shipping times from three weeks to nearly eight weeks.

“The big four can take mitigation measures while all this is going on, and turn to other suppliers. But for some of the Asian economies, their roster of suppliers is less diverse, and they're in a real bind. Some of this discourse has already come into view. That’s the physical side of it. What about the sentiment side of it? The trading community is hoping that all will be done and dusted in four weeks … But once the four-week period has lapsed, you will see the nervousness in the market amplify,” Sharma said.

The road to recovery

A critical takeaway from the discussion was the “asymmetry” of the crisis. While the Strait of Hormuz can be closed in an afternoon, reopening the value chain is a monumental task. "Even if the Strait were cleared today, the industry faces a two-to-three-month lag before operations return to normal," the panel noted.

Shut-in wells require remedial work, refineries must be recalibrated, and a massive backlog of shipping must be cleared. Furthermore, damage to specific LNG terminals, such as those in Qatar, may create a longer tail for natural gas disruptions compared to crude oil.

2026: the year of energy security

The consensus from the panel was clear: 2026 will be defined by a global rush for energy resiliency. Whether through new insurance plans to revive shipping or the construction of further bypass infrastructure, the current crisis has put the spotlight on the global energy infrastructure, need for amplifying the investment in the sector, and strategies to mitigate the current situation.