The economic consequences of the war against Iran are expected to be felt for many months, according to International Energy Agency chief Fatih Birol. Energy analysts highlight the critical situation for liquefied natural gas (LNG), with many production facilities in the Middle East damaged. Shipping giant Hapag-Lloyd announced it will continue avoiding the Strait of Hormuz for now.
"It will take time to safely bring the shut-down facilities back into operation," IEA chief Birol told Germany's Süddeutsche Zeitung newspaper. "The tankers leaving the Gulf region also need time to reach their target markets. For South Asia, this takes only a few days, but for more distant markets in Asia and Europe, it takes several weeks."
He expressed hope that the Strait of Hormuz would be fully reopened by the end of April. "The longer it remains closed, the more painful it will be, and the more difficult the return to pre-war conditions," Birol added.
Hapag-Lloyd welcomed that there had been "apparently some progress" in negotiations between the United States and Iran. "Nevertheless, the situation around the Strait of Hormuz remains tense. Whether the announced opening will actually hold will become clear in the coming days." The company said it would continue to assess when "the time will be right for a passage to be possible again."
"The ceasefire is to be welcomed, but European gas markets should not confuse the short-term relief in prices with lasting stability," explained energy specialist Ana Maria Jaller-Makarewicz from the US energy think tank IEEFA. The global LNG market is "structurally damaged." Qatar, one of the world's most important LNG producers, "has indicated that repair work and restoration of supply will take years."
She also expects prices to continue rising in the coming days due to very low levels in European gas storage facilities, Jaller-Makarewicz added. The strategy of relying on LNG following the 2022 gas crisis caused by the absence of pipeline deliveries from Russia has failed - Europe is now "at the mercy of global LNG markets."
"Households consume at least a quarter of Europe's gas supply, and there are alternative technologies, from heat pumps to better insulation," the analyst explained. "Gas should be reserved for sectors where alternatives are expensive. Heating homes with gas is like running your water pipes with champagne."
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