The Decibel - How the war against Iran is choking global energy supply

Episode Date: March 4, 2026

Since the U.S. and Israel first struck Iran on Saturday, energy prices have been on the rise. Oil prices are up around 13 per cent, and LNG – liquefied natural gas – is up around 75 per cent. 20 per cent of the world’s oil and LNG pass through the narrow Strait of Hormuz, a passageway between the Persian Gulf and the Arabian Sea that is effectively being blocked by Iran’s Revolutionary Guards. Eric Reguly is The Globe and Mail’s European Bureau Chief. He joins the show to talk about the role energy plays in the war in Iran, and how the reverberations are being felt far beyond the Middle East. Questions? Comments? Ideas? Email us at [e-mail] Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

As the war in the Middle East continues, an accident of geography could turn this regional war into a global energy crisis. The Strait of Hormuz is a narrow passageway from the Persian Gulf into the Arabian Sea. And every day, 20% of the world's oil and liquefied natural gas passes through it. But since U.S. and Israeli strikes began on Saturday, commercial shipping through the strait has virtually stopped. And as a result, oil and gas prices are going up. So today, we're talking to Eric Reguli. He's the globe's European Bureau Chief. He'll break down the role that oil and natural gas play in the war

and how the effects of this conflict could ripple out far beyond the Middle East. I'm Cheryl Sutherland, and this is the Decibel from the Globe and Mail. Hi, Eric, thanks so much for joining us today. A pleasure to be back. And we should note that we're speaking at about 11 a.m. Eastern time on Tuesday, which is 5 p.m. your time in Rome, and things are changing quickly. So with that in mind, knowing things could continue to change, what's going on with the energy markets right now? Well, today was another big rise in both oil and natural gas prices. It started yesterday morning when the markets opened in Europe. oil shot up, natural gas shot up a lot more, and that trends continued today.

I would not say, Cheryl, that we're in an oil crisis yet. We're on the verge of a gas crisis, though. Right. Okay. So just to get some numbers in here, on Tuesday, Brent Crude was up to U.S. 8350 a barrel, so that's extending the two-day rise to 13%. Yes. And then, like you said, lucify natural gas is where the price is really shot up.

In Europe, the price for LNG is up 25% on Tuesday, but 50% from the previous day. So does that make it 75% total? About that, yes, about that. Now, during when Russia invaded Ukraine in 2022, gas prices went up a lot higher and a lot faster than in the last two days. But they're getting very high now. And economists are worried that these surging energy prices could stoke inflation. and this is bad news for Donald Trump with the midterm elections coming up and affordability being a huge, huge story. Absolutely. So when we talk about the prices going up, there is a difference between liquefine natural gas and oil.

Oil is going up, but liquefine natural gas is going up much higher at this point. Why hasn't the price of oil been impacted as much as the price of liquefied natural gas? That's a good question. That's because there are a lot of sources of oil on the price. planet. United States, for example, is actually a net exporter, meaning it exports more oil and oil products than it takes in. OPEC supply is actually rising. There's a glut of oil on the market. There's also huge storage capacity in China and other countries. So yes, the price is going up, like I said, it's not going up to crisis levels yet. Natural gas is a different story. Now, We're talking about liquefied natural gas.

This is gas that is super chilled, put in those weird tanker ships that look like they have three huge balloons on them. That's full of liquefied natural gas. 20% of LNG comes from the Persian Gulf, mostly Qatar. And those ships are not getting through the Strait of Hormuz. It's really a story about the Strait of Hormuz right now. There's no ship going north into the Gulf, Persian Gulf, no ship. no ships coming back out of it. Okay, let's talk about that because that's really important to the story, as you mentioned.

What exactly is the Strait of Hormuz? The Strait of Hormuz is the opening from the Gulf of Oman, which is a small piece of the Indian Ocean, that goes into the Persian Gulf. Now, there's six countries on the Persian Gulf. Iran occupies most of the northeast coast. Then you've got Iraq, Kuwait, United Arab Emirates, and Qatar, and Oman. And that's where 20% of the world's localized natural gas is made and exported. Now, it has to go through this very narrow strait called Hormuz. At its very widest, it's only 33 kilometers.

But the actual shipping lanes are only three kilometers north and three kilometers south. There are 25 LNG carriers parked, anchored on either side of the Strait of Hormuz because their captains are afraid of going through. And also, not only that, they can't afford to go through. Why is that? Because the insurance rates for these ships has skyrocketed. Because there's a war going on. And there have been Iranian missile attacks on some of these ships on LNG. factory sites in the Persian Gulf. So the captains are going, it's not worth our danger. It's a risk.

And we can't afford to anyway. So the world is suddenly star out of LNG. Right. And so basically this Strait of Hormuz, this is the only way out for these ships that are trying to get oil or LNG out to different parts of the world, specifically Europe and Asia. It's the only way out for LNG. There's a couple small pipelines that can get some oil up. But, okay, think of it. it this way. Think of Lake Ontario. There's only one exit downstream, which is the St. Lawrence. It's exactly like someone's blocked the St. Lawrence River. You can get a ship close. You can't get a ship past a thousand islands into the greater St. Lawrence. It's exactly the same scenario. So this is really important. So there's, especially when it comes to LNG, you can't get out right now.

And of course, you mentioned that Europe is very reliant on LNG from this part of the world. Can you just kind of tell me a little bit more about how reliant Europe is. is on LNG? Okay, I got to go back to the Ukraine war and the Russian invasion in February 2022. Yeah. After the invasion, Russia cut off supplies of gas to Europe. Russia was probably the main supplier of gas to Western Europe, notably Germany. After Russia caught off supplies, Europe said, we're going to cut off the rest of the supplies. We can't be buying Russian gas, which is in effect subsidizing Russia's war in Ukraine. So they shut the Nord Stream Pipelines, and then the Nord Stream Pipelines got blown up,

if you remember that. The point being that all of a sudden, the main supplier of gas to Europe was gone. That was Russia. So it had to look for new supplies. So it went to Norway and it went to United States. And it went to largely Qatar in the Persian Gulf. So, Qatari gas is very important for Europe. Now, it's even more important for China, Japan, and South Korea, where in the last few days,

the prices in Asia have gone up three times as fast as the prices in Europe. But still, LNG from the Persian Gulf is absolutely crucial for the European and Asian economies. And it's not getting out, absolutely not getting out right now. And there's no sign when it will get. out. I mean, today, the war has been spreading. Yeah, exactly. So just to get back to the Strait of Hormuz, it being kind of effectively closed, right? So that means that one fifth of the world's supply of LNG is not getting out in about one fifth of the world's oil supply. So this is a huge deal. Who has control over the Strait of Hormuz? Well, it's effectively Iran. If you look at a map,

you have Iran on the northeast side, and you've got Oman on the southwest side. Amman's tiny. Iran controls it. They presumably have missile batteries on the shore. They've had drone attacks. Again, it's very narrow. And the shipping lanes are exceedingly narrow. They're three kilometers either way. So one sunken ship there or one badly damaged ship there could block the route. One or two ships have gotten through. They've turned off their transponder. at night and they go through, but it's highly risky. Almost no ships are going through. They're just parking on either side. So yes, it's controlled by Iran. There is talk that European and American naval ships, if the street stays effectively closed for a long time, that the American and European navies will go in and make sure it stays open and make sure that ships are escorted through. Now, that's happened in the past. There was the tanker wars a couple decades ago where exactly that happened. Yeah. And as you mentioned that it's effectively closed, it can't actually be, quote,

quote, quote, legally closed. International law guarantees passage. So legally, it can't be closed. But of course, that doesn't matter if it's effectively closed at this point. And on Monday, Iran's Revolutionary Guard said that the Strait of Hormuz is effectively blocked and that they said they'd set fire to any ships passing through. What is their goal with that threat? I think the goal. The goal is there's several theories. The most prominent theory is that to increase the economic and financial pressure on the Gulf states, such as United Arab Emirates and Qatar, especially Qatar, because if they can't get their hydrocarbons out, the oil and gas, they're going to suffer economically and financially big time. Now, Qatar has already closed the world's biggest LNG factory.

It was shut down a day or two ago because it did get a drone attack. So I think the theory is that Iran is thinking that if you put a lot of financial pressure on the Persian Gulf states that produce oil and natural gas, those states in turn will put pressure on the Israelis and the Americans to say, look, we're dying here economically. Stop the war. We're your allies. We're not your enemies. but this war is killing us economically. Now, it could backfire in the sense that there is now talk that the Persian Gulf states, I mean, excluding Iran, of course, are so angry that they may be tempted to join the American-Israeli war against Iran, which is not a good scenario because that scenario, the war intensifies. and if the UAE, for example, gets involved in the war, starts bombing Iran along with the Americans and Israelis,

then the Iranians are going to, will of course, retaliate even more than they already have. So right now we're seeing ships that are not going through. Of course, this is still the early days of this war. But what happens if the Strait of Hormuz stays effectively closed for longer than a few days? This we know for sure. The longer the Strait of Hormuz stays closed, the higher oil and natural gas prices will go, especially gas prices, which means liquefied natural gas. Europe and Asia are in a panic about this.

You can just tell, Cheryl, you could just tell on the stock market. I mean, the companies in Europe anyway that are falling of the stock market are, for example, the big industrial companies in Germany, Porsche, Volkswagen, Mercedes, the ones that are very energy intensive because they use some oil, but they use a lot of gas to power their factories. Their bill is soaring right now. That's really interesting. Soaring. Okay.

They're probably going to keep going up tomorrow because the Strait of Hormuz is still closed. There is no sign that's going to open in the next 24 or 48 hours. The war is spreading. And so that's why these big industrial companies, the share prices are falling. We'll be right back. Let's follow these ripple effects further outward. We talked a little bit about how China is heavily reliant on energy from this area. What are we hearing from China at this point?

Well, China today is begged the Americans, begged the UN, begged the Europeans, said, look, we need that straight open. This is bad for the planet environmentally because LNG is actually a lot cleaner fuel than coal. China has got a lot of coal. So as LNG supplies go down, they're going to start firing up more coal plants, which means more pollution, more CO2, more global warming. And let's hope this is just temporary. But China does have options. It loves LNG, but it also loves coal.

And it's got hundreds and hundreds of coal plants. What about Europe then? You did mention how some of these companies are being hit hard on the markets. but what are they doing right now to deal with this shortage? Well, they're suffering. I mean, they're not getting gas from Russia because it's blockaded. It's embargoed. So the Americans will ship more LNG.

America is a huge LNG exporter. Canada actually is starting to export LNG from the West Coast, not the East Coast. And it just started. There's not enough Canadian LNG to make a dent in the world markets. Now, there may be in five years, not right now. And it's a long way to go from British Columbia all the way across Pacific to Europe. It just doesn't make any financial sense. If you could think of the amount of fuel, these ships have burned just to get there going a long way around the world.

So who will benefit from this? Certainly, United States, certainly Norway. But, you know, they only have so much capacity. Now, the winter is ending in Europe. So LNG, the burn rate will start declining as the warmer weather comes in the next month or so. But it all goes back to the Strait of Hormuz. If it stays blocked, then, again, I don't know for how long. But let's say if it stays blocked for a month, which it really could, then you have an energy crisis in Europe.

You brought up Canada there. And I just wanted to make a note here that Canada's energy ministerial. Mr. Tim Hodgson told the CBC that he's, quote, starting to get calls from countries about how Canadian energy producers can fill the gap. You already talked about how it's possibly not realistic for Europe to be relying on Canada, especially as we don't have that much LNG. But I guess, like, what do you make of the fact that countries, we don't know which countries, but countries are calling Tim Hodgson looking for potential ways of Canada filling this gap? Well, it shows two things. One, how desperate they are these countries. They're looking for energy supplies anywhere they can get it.

But also, their lack of knowledge about Canada. I mean, we know. You and I know there's no LNG in the East Coast anyway, just starting on the West Coast. But, you know, the knowledge of Canada, you know, I've lived in Europe a long time, is pretty small. And, you know, the average European would think, well, energy is huge in Canada. The Canada is an energy powerhouse. It is, but only in North America. It is. It's not, you know, it doesn't export energy to Europe, really. You know, it exports oil to

United States, and it's just starting to export LNG to Asian markets, but not to European markets. What do we know about what the U.S.'s goals are for Iran's energy industry? I think Donald Trump, who was totally transaction-oriented, would like a, quote, deal. He always wants a deal. Now, remember last year in Ukraine, he did a deal. He said, Ukraine, Zelensky, will give you some weapons, some financing, some help to make sure you can continue this war. In exchange, we want access to your resources to specifically your rare earth metals. Trump is obsessed with rare earth metals because China has a stranglehold on them. So the United States is looking for alternative supplies. I don't think,

Donald Trump wants the wholesale destruction of Iran. Why? A, I don't think he can afford a long war. B, he is soon going to get worried about energy prices. I mean, because they're rising in the United States, too. If oil prices rise in the London market, it sets a benchmark price for the world, for example. So he can't afford really high prices in stoking inflation in an election year in the midterms. are coming up. But I also think that he knows that to destroy Iran wholesale means there will be no possibility of a deal. A deal would see United States invest in Iranian resources. It's got a lot of metals, a lot of precious metals, rare earth metals, iron ore. It's got a lot there. And to, have American access to those Iranian resources in exchange for, you know, helping to rebuild the

economy is probably a deal he would like to entertain. But that, he can't do that if Iran is utterly destroyed. Yeah. One thing you've talked about, Eric, is that it's Europe that's really reliant on energy from the Gulf. And of course, Russia used to be a large source of energy for many European countries. If you can't get oil and loophied natural gas from the Middle East, Does this test the resolve of the embargo on Russia? No, I don't think so. I mean, that ship has sailed. I mean, how does Russia even get gas to Europe now?

The two Nord Stream pipelines were blown up. They don't exist anymore. Those are the pipelines that went from the far west of Russia to northern Germany through the Baltic Sea. They got blown up. We still don't know who the culprits are. So the main conduit for even if Russia said, okay, I'm withdrawing from Ukraine right now. I love you, Europe, peace and love.

I want to sell you gas again. They can't because those pipelines are destroyed. They're underwater. You can't get at them. Now, there's a couple of other smaller pipelines that go in through Southeast Europe, but they're not enough. No, that's gone. And I don't see politically for you. Europe to allow itself to become beholden, once again, to Russia would be political suicide, absolute political suicide.

Remember, the Americans were warning, under Biden, were warning Germany and the rest of Europe saying, stop. This is before the war, before the Ukraine war, stop taking Russian gas. Russia cannot be trusted. It's using gas as political and economic leverage. it can strangle you if Russia goes from friend to enemy, which exactly happened. Eric, from all that you've laid out today, where would you say the energy conversation fits into the bigger conversation around this war? Like, how does it impact what's happening? So far, the war as a shooting war is fairly contained. Yes, Israel's bombing Lebanon. It's invading

southern Lebanon. Yes, there's been a few attacks. on energy facilities in the Gulf by Iran, but so far it's pretty small. But what this war shows you is that even though the fighting war, the shooting war, is fairly contained. It could go regional, but so far it hasn't, is that energy supplies are so tight around the world that a war in a small piece in this planet can affect the entire planet. it has because look at gas prices up 50, 60% in two days alone. Oil prices up 12, 13, 14% in two days alone. And these are going to keep going up as long as the trade of harm moves. So in this sense, in the energy sense, this war is affecting every single person on the planet.

Eric, thank you so much for coming on the show. I really appreciate you taking the time. Thank you. That was Eric Regulay, the Globe's European Bureau Chief. That's it for today. I'm Cheryl Sutherland. Bianca Thompson joins us from the Canadian Journalism Foundation's Black Fellowship Program and is our associate producer. Our producers are Madeline White, Rachel Levy McLaughlin and Michal Stein.

Our editor is David Crosby. Adrian Chung is our senior producer, and Angela Pichenza is our executive editor. Thanks so much for listening. listening.