WASHINGTON, July 15. /TASS/. A substantial share of the capacity to contain the energy crisis triggered by the war involving the United States and Israel against Iran has already been exhausted, according to a new analytical note published on the International Monetary Fund's (IMF) blog.
"Energy shocks still bite. What cushioned the initial blow this time is that energy markets had room to maneuver and absorb it. As tensions flare again in the Strait of Hormuz, that room is now smaller and shrinking further as spare capacity has been deployed, demand has compressed, and inventories have been drawn down. Unless inventories are replenished, the world will start from a weaker position when the next shock comes," the report said.
"Why didn’t prices climb higher? The answer is that a combination of factors helped cushion the initial blow. But much of that room has now been used up," the IMF experts said. According to them, "a quick supply recovery is essential to avoid further damage to the global economy".
"By the end of May, more than 1.1 bln barrels of crude - equivalent to about 10 days of typical global consumption - had not reached the market. At the same stage of the disruption, the shortfall exceeded those of the 1973 oil shock, the Iran-Iraq war, and the Gulf War," the report said.
On February 28, the United States and Israel launched a war against Iran. The Islamic Revolutionary Guard Corps (IRGC), Iran's elite military force, announced a large-scale retaliatory operation. In addition, Iranian authorities decided to close the Strait of Hormuz to vessels linked to the United States, Israel, and countries that supported what Tehran described as aggression against the Islamic Republic. Roughly 25% of global oil trade and about 20% of liquefied natural gas shipments pass through the Strait of Hormuz.
In June, Washington and Tehran signed a memorandum of understanding providing for an immediate ceasefire on all fronts. However, on the night of July 7-8, the United States resumed large-scale strikes against Iran, accusing Tehran of violating the terms of the agreement. US President Donald Trump said on July 10 that the ceasefire with Iran was no longer in effect, although the negotiation process was underway.