Agencies | New York:
The International Energy Agency (IEA) has warned that the global economy could enter a “red zone” if disruptions to commercial shipping through the strategically vital Strait of Hormuz continue beyond June amid the ongoing US-Iran conflict.
Speaking to CNBC-TV18, IEA Executive Director Fatih Birol said the world is rapidly exhausting the buffers that have so far prevented a more severe energy shock. He described the current situation as one of the most significant energy crises in modern history, citing substantial disruptions to global oil and natural gas supplies.
“The inventories, the stocks, the money in the pocket are diminishing, and new supplies are not coming in. We are approaching the bottom of those reserves,” Birol said.
He cautioned that if the Strait of Hormuz is not fully and unconditionally reopened by the end of June, the global economy could face heightened risks during the peak summer travel season.
“If we are not able to see a fully and unconditional opening of the Strait of Hormuz by the end of June, then in July and August, when travel demand rises across many countries, we may be entering the ‘red zone’ for the global economy, especially in Asia,” he added.
Inflation and Market Volatility Risks
Birol warned that energy markets are likely to remain volatile even if a diplomatic breakthrough is achieved and shipping routes are restored.
“We are also likely to see upward pressure on inflation in several countries, particularly where currencies are weak,” he said. “The coming weeks and months will represent a difficult transition period. Restoring Middle Eastern oil supplies will not be easy, considering the region accounts for more than 20 percent of global oil exports.”
No Immediate Plans for Additional Emergency Oil Release
Addressing speculation about further intervention in energy markets, Birol said the IEA is continuing to monitor developments but does not currently see a need for a second release of emergency oil reserves.
In March, all 32 IEA member countries agreed to release 400 million barrels of oil from strategic reserves to help stabilize markets affected by the conflict in West Asia.
“We saw that as soon as markets learned this oil would be made available, prices dropped by nearly $20 per barrel,” Birol said. “The measure was highly effective and received unanimous backing from member countries, as well as strong support from nations in the accession process, including India.”
While leaving the door open for future action, he emphasized that market conditions have not yet reached the threshold for a second coordinated release.
“If we believe the timing is right, we will certainly consider it. But at the moment, we are not there,” Birol said.
