Energy Resilience Masks Shifting Geopolitical Vulnerabilities in Post-Hormuz World

When Iran closed the Strait of Hormuz in late February, the head of the International Energy Agency called it the largest supply disruption in the history of the global oil market. One-fifth of the world's oil and liquefied natural gas flowed through that narrow passage. For nearly four months, it was almost entirely shut. Yet the world did not tip into the recession that energy analysts had warned about for decades. Oil prices climbed to $126 a barrel in April—steep, but nowhere near the $200 that veteran forecasters had predicted. By June, when Washington and Tehran signed a memorandum of understanding, Brent crude was trading just above $100. When fighting resumed and the strait closed again in July, prices fell into the $80 range. The global economy, by most measures, had weathered what should have been catastrophic.

This resilience was not luck. It was the result of deliberate choices made years before the crisis arrived. Saudi Arabia and the United Arab Emirates had built pipelines around the strait precisely as insurance against this kind of disruption. When the closure came, those pipelines moved over five million additional barrels a day to global markets. The International Energy Agency, created after the 1973 oil crisis, coordinated the largest release of emergency oil stocks in its history. Traders and energy companies drew down commercial reserves. The United States, now the world's largest oil producer, surged exports to historic levels and briefly became a net exporter of crude oil for the first time since World War II. China, holding an estimated 1.4 billion barrels in storage, reduced its own imports by roughly five million barrels a day, easing pressure on global supplies. These measures, layered together, offset most of the shortfall.

But the apparent mildness of the crisis masks a far more troubling reality. The burden of adjustment did not fall evenly. Oil demand had to drop by roughly five million barrels a day in the second quarter of 2026 to match available supply. In advanced economies—the United States and Europe—this adjustment was manageable. In Asia and the developing world, it was brutal. Dozens of countries adopted nearly two hundred emergency measures. Bangladesh restricted air-conditioning use. Laos shortened the school week. Sri Lanka declared an additional public holiday. Kenya and Nigeria capped fuel price increases or suspended fuel taxes, transferring the cost from consumers to already strained public budgets. Jet fuel became acutely scarce, with spot prices briefly reaching nearly $200 a barrel in some places. Shortages of liquefied petroleum gas forced households and restaurants in India to cut back. The relatively muted global price shock was not a sign that the disruption was mild. It was a sign that poorer countries were bearing the brunt of it.

This crisis has redrawn the map of energy power. The United States is far more resilient to oil shocks today than it has been in at least half a century. The U.S. economy is nearly four times larger than it was in 1973, but domestic oil demand is only slightly higher than it was in the 1970s. Whereas the country imported 60 percent of its oil two decades ago, it is now the world's largest producer and a major net exporter. Economists at the Dallas Federal Reserve estimated that an oil shock comparable to this year's would have reduced U.S. real GDP growth by 5.6 percentage points in 1980, compared with only 0.3 percentage points today. The United States' abundant domestic gas production shielded it even more dramatically from the global shock. While European and Asian natural gas prices climbed toward $20 per million British thermal units, U.S. benchmark prices remained below $3. Over the last two decades, this disconnect has saved American consumers roughly $5 trillion.

China's role has shifted as well. As the largest oil importer and by far the largest holder of oil inventories, Beijing can alter the global energy balance by adjusting how much it buys, exports, stores, or releases. This ability may become even more important in the next phase of the crisis. Whereas inventories in OECD countries have been depleted, China appears to have drawn only modestly from its reserves. If a second wave of disruption comes, avoiding a much sharper price spike may depend in part on Beijing's willingness to use those reserves. This gives China a potentially powerful source of geopolitical influence. For decades, U.S. presidents have called Saudi leaders during oil crises to ask them to release spare production capacity. If Chinese inventories become one of the last lines of defense against damaging global price spikes, Beijing may come to occupy a comparable position.

The crisis has exposed a new balance of power in energy politics. A disruption that a generation ago would have humbled Washington instead left the United States more insulated than any major economy. Costs overwhelmed the countries least able to bear them. Whereas energy shocks once disciplined the powerful, they now increasingly punish the vulnerable and spare the strong. A superpower shielded from the consequences of the turmoil it helps create has fewer reasons for restraint. And a country that can steady or shake the market at will—be it the United States or China—has a lever difficult to counter.

The real hazard now is overconfidence. The buffers that minimized the disruption so far will hold for only so long and must be reinforced if the world is to endure future shocks. Global oil inventories are now significantly depleted. If renewed fighting in Iran results in another period of prolonged disruption, the global economy will struggle much more mightily to contain its damage. Escalating threats in the Red Sea could compromise the Saudi pipeline that has been essential in mitigating the Hormuz crisis. The cushions that helped the world manage the last five months are now more threadbare. A second phase of the Hormuz crisis could prove substantially more damaging than the first.