Global Energy Crisis Threat Looms Due to War, IEA: World Economy in Grave Danger

Global stock markets tumbled on Monday (23/3) while oil prices surged sharply after US President Donald Trump and Iranian leaders exchanged threats regarding the Strait of Hormuz. The situation intensified after Israel stated that the Middle East conflict could last for several weeks. Entering the fourth week without signs of de-escalation, International Energy Agency (IEA) Executive Director Fatih Birol warned of the potential for the worst global energy crisis in decades. He emphasised that the world economy is under “grave threat” due to this crisis. Observers now fear a surge in inflation that could force central banks to raise interest rates, as well as halted fertiliser shipments threatening global food security. Tensions peaked after Trump issued a 48-hour ultimatum to Iran on Saturday to reopen the Strait of Hormuz or face the destruction of its energy infrastructure. Via Truth Social, Trump threatened to “strike and obliterate” Iran’s power plants, “starting with the largest first,” if Tehran did not fully open the waterway by Monday at 23:44 WIB. “The outcome and Trump’s next steps, especially in terms of escalation, will have significant implications for markets through the rest of this week to the end of the month and quarter,” wrote Chris Weston from Pepperstone. Iran responded fiercely, warning that Hormuz “will be completely closed” if Trump carries out his threat. Parliament Speaker Mohammad Bagher Ghalibaf threatened to permanently destroy vital infrastructure across the region, which would cause oil prices to rise “for a long time.” Reports of explosions in Tehran began emerging on Monday as Israel announced a new wave of attacks. Meanwhile, Saudi Arabia and the United Arab Emirates also reported recent attacks in their territories. The Israeli military stated it would expand ground operations in Lebanon against Hezbollah, estimating the fighting would continue for several more “weeks.” This escalation hammered Asian stock exchanges, with Seoul dropping 6.5 percent and Tokyo falling 3.5 percent. Brent crude oil prices surged above $113 per barrel, or about Rp1.89 million, and West Texas Intermediate exceeded $100 per barrel, or about Rp1.69 million. “The global economy faces grave danger today, and I very much hope this issue will be resolved as soon as possible,” said Fatih Birol. He added, “No country will be immune to the impact of this crisis if it continues in this direction. Therefore, global efforts are needed.” This oil price surge is beginning to trigger inflation concerns, forcing central banks to review their monetary policies. The Reserve Bank of Australia even raised interest rates last week. Projections of higher borrowing costs are also pressuring gold prices, which recorded a decline for eight consecutive days to around $4,350 per ounce, or about Rp73.5 million. Tensions in the Gulf region are intensifying after Iran issued a stern warning of placing mines along all communication routes in the Persian Gulf. Iran claims to have begun collecting a $2 million transit fee, or about Rp32 billion, from several ships passing through the Strait of Hormuz. Iran claims to have launched airstrikes targeting US military assets at Prince Sultan Air Base in Saudi Arabia and Bahrain. Iran strongly denies involvement in the attack of 4,000 missiles on the British military base in Diego Garcia on Sunday (22/3) local time. PKS supports President Prabowo Subianto in postponing the deployment of Indonesian peacekeeping troops to Gaza, Palestine, amid the escalating Middle East conflict involving Iran, the United States, Iran, and Israel. Iran states that the Strait of Hormuz is open to international shipping, except for enemy vessels, amid rising tensions with the United States threatening to destroy Iran’s power plants.