Wang Ning: Energy Crisis Accelerates Global Energy Transition

How does the Strait of Hormuz crisis accelerate the global energy transition?

In recent days, the situation in the Middle East remains uncertain, and the Strait of Hormuz—this critical global energy “throat”—is filled with unpredictability. This has once again made energy a conduit for geopolitical shocks transmitting to the global economy.

The escalating Middle East tensions are significantly impacting global oil and liquefied natural gas supplies. According to the International Energy Agency’s March report, shipping through the Strait of Hormuz has sharply declined to very low levels compared to before the conflict. Gulf oil-producing countries have reduced daily crude oil output by at least 10 million barrels, and global daily oil supply in March is expected to drop to about 8 million barrels. This has caused intense fluctuations in international oil prices, with Brent crude futures approaching $120 per barrel at one point. Bloomberg data shows that global liquefied natural gas exports have also fallen to a six-month low. The surge in energy prices has directly led to soaring costs in aviation, shipping, and logistics. As a key raw material, rising oil prices will also squeeze profit margins in energy-intensive industries such as petrochemicals, plastics, fertilizers, and automotive manufacturing. If the Strait’s shipping route remains disrupted long-term, it will push up global inflation expectations, tighten global liquidity, and potentially trigger panic in financial markets.

High energy prices primarily hit the global manufacturing sector, with especially profound impacts on Asia and Europe. Japan relies on approximately 90% of its oil imports through the Strait of Hormuz; South Korea depends on about 80%. Europe, already strained by the energy crisis caused by the Russia-Ukraine conflict, faces even greater difficulties due to Middle East instability, further hampering its manufacturing industry.

However, crises often breed opportunities for transformation. Some media outlets have observed that rising oil prices have boosted electric vehicle sales in countries like Australia and Vietnam. As Han Wenshou, Deputy Director of the Office of the Central Financial and Economic Affairs Commission, stated at the China Development Forum: “The current international situation provides China with an insight—fossil fuels like oil and gas often require imports and international transportation, whereas renewable energy sources like wind and solar are local resources that do not require import or transportation.” This insight is not only relevant to China but also offers a profound lesson for all economies worldwide that depend on importing fossil energy.

The core of energy security is shifting from “how to ensure supply chain safety” to “how to reduce dependence on imported fossil fuels.” The blockade of the Strait of Hormuz has demonstrated in an extreme way the vulnerability of any energy structure reliant on geopolitically sensitive regions. Renewable energy sources such as wind and solar, characterized by their localization, distributed nature, and sustainability, are becoming the best complement to address energy security vulnerabilities.

For the United States, the initiator of this crisis, energy transition is a crucial strategic choice. In the short term, rising oil prices benefit domestic traditional energy companies with high profits and motivate increased exploration and investment in Venezuelan crude oil. However, in the long run, ongoing turmoil in the Middle East will raise U.S. inflation expectations and limit the Federal Reserve’s room for interest rate cuts. As a major fossil fuel producer, the U.S. must consider energy channel security in its strategic planning, but over-reliance on military force to safeguard energy routes is a high-risk strategy akin to drinking poison to quench thirst. Therefore, accelerating energy restructuring and reducing dependence on oil-based economies are essential to regain strategic initiative.

The long-term blockade of the Strait of Hormuz acts as a stress test, exposing the fragility of the global energy system and clarifying the direction for energy transition and security:

First, energy sovereignty depends on energy structure. Countries relying on imported fossil fuels, regardless of size, risk becoming passive in sudden geopolitical conflicts. Accelerating the development and utilization of localized clean energy sources such as wind, solar, nuclear, and hydrogen is not only a global consensus on climate change but also a strategic necessity for maintaining energy security.

Second, energy transition is the foundation of economic resilience. Volatile energy prices are reshaping global industrial patterns. Countries and regions capable of providing stable, affordable, and clean energy will have advantages in the new round of global industrial competition. Conversely, economies with high external energy dependence and slow transition will face dual pressures of manufacturing outflow and high inflation.

Third, the decoupling of energy and monetary systems is underway. The petrodollar system, built on “Gulf oil exports—dollar settlement—U.S. security guarantees,” is being challenged. The crisis in the Strait of Hormuz not only tests the U.S. ability to secure shipping lanes but also creates a historic window for other currencies to participate in settlement. The trend toward de-dollarization in energy trade is progressing alongside the shift away from fossil-based energy structures.

Crises often serve as catalysts for change. This energy crisis is pressing the “accelerate” button for global energy transition. The current situation in the Strait of Hormuz sends an unmistakable signal—energy transition is not just a future-oriented vision but a matter of immediate survival and strategic choice. (Author: Deputy Research Fellow at the Institute of World Economics, Ministry of Commerce)