Oil Shock on the Horizon: IEA Warns of Critical Shortage and Economic Blow

Interruptions in oil supplies from the Middle East will deepen in April and will begin to have a noticeable impact on the European economy, warned the Director of the International Energy Agency (IEA), Fatih Birol, as quoted by Reuters.

According to him, the closure of the Strait of Hormuz seriously restricts supplies, and since the beginning of the conflict between the US and Israel against Iran, over 12 million barrels of oil have already been lost due to attacks on energy infrastructure and restrictions in shipping.

“Oil losses in April will be twice as large as those in March, in addition to the losses of liquefied natural gas. This will cause inflation and will slow economic growth in many countries,” Birol said in an interview for a podcast with the head of the Norwegian sovereign fund, Nicolai Tangen.

The expected deepening of the shortage is also explained by the fact that some of the supplies in March were agreed before the start of the conflict and reached their final markets with a delay.

According to Birol, the most serious shortage is that of kerosene and diesel, which is already affecting Asia and is expected to reach Europe in April or May.

He pointed out that the IEA is considering the possibility of further releasing strategic reserves, after the member countries have already agreed to release a record 400 million barrels of oil.

According to the agency's assessment, the current interruptions in the supply of oil and liquefied natural gas are more serious than the oil crises of 1973 and 1979, as well as the loss of Russian gas supplies after Russia's invasion of Ukraine in 2022, taken together.

Around 40 key energy facilities in the Middle East have been damaged since the beginning of the conflict, and their restoration will require time.

“We are heading towards a huge supply disruption – the largest in history so far,” Birol warned.