Taken From “The Wall Street Journal”
The reopening of the Strait of Hormuz, as part of a peace deal between the United States and Iran, would ease an energy crisis that has sapped economic growth and fueled inflation around the world. One of the surprises of the closure of this Middle Eastern energy artery, however, was that the global economy did not suffer a more severe blow. The pain was not as severe as after the Russian invasion of Ukraine in 2022, or the oil crises of the 1970s. What did the global economy learn from this clash and the crisis that was Hormuz?
PREPARED PLACES
Going into the Hormuz crisis, the world had plenty of oil on hand. Major importers in Europe and Asia were well-stocked with strategic reserves, while commercial stocks were healthy after large build-ups in 2025. This gave many economies a buffer that limited disruptions. In the United Kingdom, fuel sales fell in April as people avoided car travel. Some European and US airlines cut flight schedules due to higher jet fuel prices.
In Japan, a food manufacturer replaced colored packaging with black and white packaging for some products in response to oil-related shortages.
The brunt of the supply crunch has been borne by poorer countries, which are unable to build up reserves. Some, such as Bangladesh and Sri Lanka, have taken steps to limit demand for oil through fuel rationing. Others have closed schools and offices and restricted the use of air conditioning. The International Energy Agency estimated that global oil demand will fall by about 5%, or 5 million barrels per day, in the second quarter of the year. That is less than the 10% decline in demand that occurred during the Iran-Iraq War, the 1973 Arab oil embargo and the 1956 Suez Canal crisis, according to Société Générale, indicating that oil shocks have become easier to manage.
MARKETS ADAPT
Fears that the Hormuz crisis would push oil prices to $150 or even $200 a barrel have not materialized. Energy producers in the Middle East have found ways to bypass the strait closure sooner than many experts had predicted, while other producers, including the United States, have increased production and exports to fill some of the gap. Exports from the Saudi port of Yanbu on the Red Sea have risen to about 4 million barrels a day, from less than 1 million before the war, according to the company Kpler.
The United Arab Emirates also increased exports via pipeline, sending oil from Abu Dhabi to the port of Fujairah in the Gulf of Oman. Meanwhile, U.S. oil exports hit record levels. Venezuela’s exports have surged 43% in the past three months compared with a year earlier, while Brazil’s exports have increased by a third, according to Kpler.
CHINA’S STRONG HAND
Chinese oil imports fell by about 3 million barrels a day, but there were few visible signs of disruption. Like other major importers, Beijing tapped its strategic reserves and found other suppliers to cushion losses from the strait closure. Refineries cut output to save crude. But China, aware of its dependence on imported energy, has reoriented its economy to use less imported oil.
Electricity generation increasingly relies on coal and renewables, while Chinese leaders have enthusiastically embraced electric vehicles, reducing demand for gasoline. The crisis has not been without costs for China: producer prices rose and consumer spending fell in May. However, the Chinese economy has shown more resilience than other Asian economies, helping to support the global economy.
GLOBAL EFFICIENCY
International Monetary Fund Managing Director Kristalina Georgieva said in April that improvements in energy efficiency were helping to cushion the blow from the war. One way to measure how efficiently economies use energy is to calculate the amount of energy needed to produce one dollar of gross domestic product. According to World Bank data, adjusted for inflation, energy intensity has fallen by about a third since 2000 in the United States and Europe, and by about 40% in China.
This shift helps economies better cope with supply disruptions. Advanced economies have shifted towards less energy-intensive services, such as finance and healthcare, away from energy-intensive manufacturing sectors. Renewables have also played an important role, as solar and wind power require less energy to produce than fossil fuels.
Household appliances have been redesigned to use less electricity, while companies have improved industrial processes to save energy, a lesson that Europe took seriously after the Russian invasion of Ukraine in 2022.
THE BOOM OF ARTIFICIAL INTELLIGENCE
The artificial intelligence boom has been an important counterweight to the energy crisis. The rapid construction of data centers in the United States and enthusiasm for the technology’s potential have boosted trade and investment, pushing stock markets to record highs. The benefits have been felt most strongly in Asian economies that supply the memory chips, machinery and electronics needed to power the AI ​​boom.
The value of Taiwan’s exports has more than doubled since the start of 2025. South Korea’s exports have increased by almost 80%, Singapore’s by 40%, and Japan’s exports have increased by about 20%. This technological fever has fueled economic momentum in key parts of the global economy, even as the oil crisis has hit other sectors.