Key Factor of Iran War is Plunging World Economy Into Unprecedented Energy Crisis, Analyst Says

Experts are warning that the world is headed for an unprecedented energy crisis and higher gas prices due to the Iran war and threats to shipping in the Strait of Hormuz.

The Strait of Hormuz is a narrow area that connects the Persian Gulf and the Gulf of Oman along Iran’s southern coast. The Strait is critical to shipping oil out of the Middle East with about 20 percent of the world’s oil and gas passing through it, CNBC reported.

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Neil Atkinson, former head of oil at the International Energy Agency, told CNBC’s Squawk Box Europe that the world would be “in a crisis the likes of which we have never seen before.” He said the closure could lead to oil production shutting down in Iraq, Kuwait and even Saudi Arabia.

Last week, Qatar’s energy minister Saad al-Kaabi, issued a similar warning in an interview with the Financial Times, saying that the situation could “bring down the economies of the world.”

The crisis has already driven the price of oil higher. CNBC reported that international benchmark Brent crude futures with May delivery traded 11.6 percent higher at $103.47 per barrel on Monday. The network noted that Brent futures had climbed as high as $119.5 per barrel earlier in the trading day.

In the interview with the Financial Times, al-Kaabi predicted that the price would eventually hit $150 per barrel.

In fact, the war has already created major disruptions. Qatar declared force majeure last week after an Iran drone strike at its Ras Laffan liquefied natural gas plant. Reuters reported Saturday that Kuwait was following suit, issuing a trade notice that it was cutting oil production due to the war and the hazards of the Strait.

Reuters also reported that the United Arab Emirates and Saudi Arabia were likely to face a similar need to reduce production. Without the ability to export their oil, the nations will soon run out of storage capacity, forcing the countries to cease or greatly reduce oil production.