The US-Israel war on Iran has sent shock waves through oil markets. What started as a disruption to oil flows through the Strait of Hormuz (SOH) has now resulted in significant output losses in key Gulf producing countries. The initial impacts were most strongly felt in Asia, given its high exposure to SOH flows both in terms of crude and products, while Europe\u2019s initial exposure was considerably lower. Yet, Europe cannot insulate itself from the resulting price shock and inflationary pressures. And if the disruption through the SOH persists, European supplies of crude and products could quickly come under strain, especially as competition intensifies for the limited pool of alternative crude and product supplies that could have offset losses from the Gulf. The EU\u2019s buffers, including strategic and commercial stocks, are limited in the face of such a severe shock, and if the disruption is prolonged, these buffers will be further depleted, impacting consumers and forcing EU governments to take difficult and costly measures.<\/p>\n
This new OIES Energy Comment examines the EU\u2019s vulnerabilities to tightening product supplies from the Gulf and rising Asian competition for crude in the aftermath of the Iran War, and reflects on the policy responses available to Europe, with a focus on the policy challenges and security risks these pressures create.<\/p>\n