(Finance Below) Oil Crisis Risk Intensifies, Global "Wallets" Forced to Pay the Bill

How does the interruption of the Strait of Hormuz expose the world’s energy vulnerability?

Beijing, March 18 (Xinhua) — The escalation of Middle East tensions and soaring international oil prices are deeply affecting the global economy.

Since the United States and Israel launched military strikes against Iran, shipping through the Strait of Hormuz, a critical chokepoint for global energy transportation, has nearly come to a halt. Consequently, international oil prices have surged, approaching $120 per barrel at one point. Fatih Birol, Executive Director of the International Energy Agency, recently stated that current supply losses have exceeded those during the 1973 oil crisis. The agency’s latest monthly report indicates that the global oil market is facing the most severe supply disruptions in history.

Against this backdrop, Japan was the first to come under pressure. On March 16, Japan released its national oil reserves independently for the first time without waiting for coordinated action from the IEA. The release totaled about 80 million barrels, enough to cover Japan’s oil needs for 45 days, marking the largest release since Japan established its national oil reserve system in 1978.

“This means the Japanese government judges the current energy risks to be more severe than in previous oil crises,” said Li Qingru, a researcher at the Japanese Studies Institute of the Chinese Academy of Social Sciences, to Xinhua. “The core reason is that Japan’s energy supply risks are imminent, and it cannot wait for international coordination.”

Li Qingru pointed out that Japan’s energy dependence is extremely high, with over 90% of its crude oil imported from the Middle East. The Strait of Hormuz is considered its “lifeline” for energy supply. While Japan had some room for energy transition during past oil crises, currently the country faces difficulties restarting nuclear power, high costs for renewable energy, and industry upgrade bottlenecks. Relying solely on short-term emergency measures like releasing reserves cannot achieve long-term structural improvements. If reserves are depleted excessively, Japan will face greater energy security risks.

South Korea is also affected. Due to tense Middle East tensions, domestic oil prices have recently continued to rise. To stabilize the market, South Korea officially implemented a “oil price cap system” on March 13, the first time in nearly 30 years that the government has used this measure.

South Korean President Lee Jae-myung admitted that the worsening crisis in the Middle East poses a significant burden on South Korea’s economy, which is highly dependent on Middle Eastern energy and global trade.

Europe is caught in a “double squeeze” of the Ukraine crisis and Middle East tensions. Zhao Yongsheng, director of the French Economic Research Center at the University of International Business and Economics, told Xinhua that after the Ukraine crisis, Europe sought to reduce dependence on Russian energy, but the Middle East situation has driven energy prices up further, with current increases of about 30% to 50%. This has sharply increased living costs for residents and burdens on businesses.

European Commission President Ursula von der Leyen recently stated that in the first ten days after the outbreak of conflict in the Middle East, rising oil and gas prices have caused Europe to spend an additional approximately 3 billion euros on fossil fuel imports.

Belgian Prime Minister Alexander De Croo proposed negotiations with Russia to restore energy supplies. He pointed out that the EU is facing a chain energy crisis that could drag Europe’s economy into recession.

To address the global oil supply tightness, the International Energy Agency recently issued a statement that 32 member countries have unanimously agreed to release 400 million barrels from strategic petroleum reserves. Fatih Birol said that although member countries have reached consensus on releasing reserves, further use of reserves may still be necessary “if needed” in the future.

Currently, military strikes by the United States and Israel against Iran have entered their 19th day, with tensions continuing. Amid the spillover effects of the conflict, the global “purse” will continue to be forced to “pay the price” for high energy costs. (End)