Energy crisis ‘tip of iceberg’ unless Hormuz reopens

• Qatar minister urges resolution
• Full impact to emerge in months
• Ras Laffan repairs to take three to five years

The global economy has seen only “the tip of the iceberg” of a looming crisis, with the full impact likely to emerge within months if the Iran conflict continues to disrupt Gulf energy exports, Qatar’s finance minister said.

Stakeholders must reach a permanent and peaceful resolution to the stoppage of commercial shipping through the Strait of Hormuz, Ali bin Ahmed Al Kuwari said yesterday at the International Monetary Fund spring meetings in Washington.

“It’s a global responsibility where we move and make sure no one can control these critical routes of food, of commerce, of energy,” Al Kuwari said.

The upending of Gulf production and exports of oil, gas, fertilisers and other commodities could leave the world economy facing a massive crisis within the next couple of months, he warned. 

Reopening the Strait of Hormuz “once and for all” is the most pressing issue facing the world today, he said. One-fifth of the world’s energy supplies usually transits the chokepoint but it has effectively been closed since the start of the US-Israeli and Iran war.

Reem Al Hashimy, the UAE Minister of State for International Cooperation, echoed this point while speaking at the Semafor World Economy event in Washington.

“Nobody should control the Strait of Hormuz. That’s the whole point. International passageways are a public good,” she said. 

In his remarks, Al Kuwari alluded to the demand destruction that could take place in the energy markets.

“Very soon, you’re going to have a problem of energy availability,” he added, where even buyers who can afford the higher prices will not be able to secure the commodities they need.

The impact will cause inflation to rise, a fertiliser shortage will disrupt the farming season and trigger widespread food crises. Limited exports of helium, a byproduct of gas processing that is vital to the healthcare industry, will constrain medical services around the world.

It will be much bigger than what the world has experienced in the seven weeks since the US and Israel attacked Iran and the Islamic Republic retaliated against targets across the Gulf region, Al Kuwari said. 

A tenuous ceasefire has been in place since April 8, but traffic through Hormuz remains severely hampered as Iran and the US trade reciprocal blockades.  

Around a third of global fertiliser supply typically goes through the waterway, while Qatar alone is responsible for some 30 percent of global helium output. 

The Gulf state has had to shut LNG production at two units of its Ras Laffan facility after Iranian strikes damaged them on March 2, Al Kuwari acknowledged. 

But he said the loss, equivalent to 17 percent of state-owned QatarEnergy’s total capacity, is already compensated by fresh output from its Golden Pass joint venture with Exxon Mobil in Texas.

The planned expansion of Qatar’s North Field, whose first phase will come online towards the end of 2026, will expand the total LNG supply Qatar can produce, according to the minister.

Further reading:

• Beyond Hormuz: how war is reshaping supply chains
• Tanker flows shift away from Hormuz to the Atlantic
• Al Jaber: Hormuz must be reopened without restriction

Iranian hits on Ras Laffan took out about 12.8 million tons of LNG per annum, Al Kuwari added, while the first two new trains in the North Field will add 16 million tons per annum by year’s end. 

Al Kuwari confirmed it may take three to five years to repair the Ras Laffan units because of the complexity of procuring the necessary equipment. He said QatarEnergy may be able to do it faster by repurposing equipment from the expansion, though that would cause delays on that “upside”. 

The IMF projected in its latest World Economic Outlook this week that Qatar’s economy will shrink by 8.6 percent this year because of the war, but will rebound by 8.6 percent in 2027 and continue growing by 5 and 8 percent annually until at least 2031.

Al Kuwari said the Gulf state is well equipped to deal with the short-term blow of the conflict. 

A “shock stability fund” at the Ministry of Finance has enough cash to support the government and economy for six months before authorities need to tap into what he called the “high level of reserves” at the Qatar Investment Authority, he said.

The finance ministry and the central bank are discussing a package to support sectors like aviation, tourism and manufacturing that have been impacted, he added.

Qatar’s budget deficit is now forecast to rise to 3.4 percent this year from 1 percent in 2025 and 4.8 percent in 2027, then slowly decline until it becomes again a surplus in 2030, according to the latest Fiscal Monitor the IMF released on Wednesday.