LONDON: While oil and gas are once again flowing through the Strait of Hormuz, the closure of the vital waterway for over 100 days could prove to be a turning point in global energy markets. The Arab oil embargo of 1973, a similarly disruptive supply shock, offers clues about where we might be headed. The latest Middle East crisis tested the limits of the modern energy system, which has evolved over recent decades into a highly interconnected global market held together by thousands of tankers, trading houses and complex pricing systems. This system proved remarkably adaptable during the U.S.-Israeli war with Iranthat began on February 28. Rapid shifts in supply flows and demand patterns mitigated the impact of what had previously been considered a "doomsday" scenario: the effective closure of the Strait of Hormuz, the narrow waterway through which nearly a fifth of the world's oil and liquefied natural gas supplies typically pass. Yet this shock was far from painless, particularly in Asia, which depends on the Middle East for 60% of its oil and gas imports. The market adaptations during the crisis - including the rundown of energy stockpiles and China's reduced imports - were not sustainable.
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