Parallels to 1973 and the Changing Energy Landscape

The current Iran war raises a central question: whether it is a transitory event or a structural change with long-term implications. The situation echoes the 1973 oil embargo, which led to a quadrupling of crude prices, a global focus on fuel efficiency, increased exploration outside the Middle East (e.g., the UK North Sea), and a shift in geopolitical power from consumers to producers, with Saudi Arabia dominating OPEC. This time, while oil dominates headlines, the energy landscape has evolved, with gas—especially liquefied natural gas (LNG)—now a critical component in the geopolitical dynamics between Israel and Iran.

Divergent Positions of Major Economic Blocs

The major economic blocs are in vastly different positions compared to 1973. The United States benefits from a shale-driven oil and gas boom, largely insulating it from the potential closure of the Strait of Hormuz. Europe has closed off Russia as its largest gas supplier, along with German nuclear power and Dutch gas, relying on renewables as a primary solution. Asia has been more pragmatic but remains overly reliant on Middle East oil and LNG. A key concern is the law of comparative disadvantage, particularly whether the US will leave Europe to its own devices regarding US LNG supply as the global energy map is redrawn.

LNG Supply Dynamics and Future Hotspots

Before the war, global LNG supply was dominated by Australia, the US, and Qatar. Australia has effectively opted out of future growth due to domestic inertia. The US, with abundant reserves and a supportive administration, faces potential limits from Gulf Coast construction costs and buyer geographic concentration. Qatar is mid-way through a substantial capacity expansion. With Russian supply sanctioned and Australia stagnant, the LNG sector must identify new supply countries capable of absorbing geopolitical risk. Five candidates emerge, all with little or no exposure to chokepoints between supply and Asian demand:

• Canada: Abundant low-cost feed-gas, a supportive political mindset, and roughly 20 days roundtrip sailing from Tokyo Bay.
• Pacific Mexico: Offers a direct route to Asian markets.
• Argentina: Its unconventional resource base is emerging as a credible supply point.
• East Africa: Resource-rich and equidistant between Europe and Asia.
• Papua New Guinea: Already in the LNG supply club, with an expansion project and short sailing distance to Asian demand centers.

Geopolitical Chokepoints and Qatar's Dilemma

While attention focuses on the Strait of Hormuz and the Red Sea, the Strait of Malacca and Singapore's strategic importance, the South China Sea, and the Panama Canal (with US-China friction) are also critical. Qatar faces a worst-case scenario with Iran controlling its only ingress and egress. As a pragmatic player, Qatar may seek accommodation with Tehran, such as a transit fee arrangement or coordinated development of the South Pars/North Field mega accumulation.

Historical Reflection and Future Implications

In 1973, the global energy map was redrawn by producer power. Even if an interim agreement between Iran and the US leads to a lasting ceasefire, Iran will retain control of a key global energy chokepoint, forcing neighbors and consumers to adjust. Other chokepoint owners will take note. The current war appears to be repeating history by shifting power to the de-facto controller of the Strait of Hormuz. The energy sector will adapt to this new reality, but it will require capital, vision, and significant effort.