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Forecast Q6 — The 2026 Global Energy Crisis and Pakistan's Energy Security

Forecast question: The closure of the Strait of Hormuz in 2026 caused what the IEA called the largest oil supply disruption in history. Discuss the geopolitical and economic consequences of this energy crisis, and suggest a strategy for Pakistan's energy security. (20)

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Why it is likely: energy was asked in 2018, 2019, 2023 ("energy's influence on world geopolitics"), 2024 ("Russia–Europe energy") and 2026 (natural resources). "Global Energy Politics" is a syllabus item, and 2026 delivered the biggest energy shock since the 1970s. Probability: very high.

What the examiner wants

  • Geopolitical consequences
  • Economic consequences (global, and for Pakistan)
  • A strategy for Pakistan's energy security
  • Marks split: context ~3 · geopolitical ~5 · economic ~5 · Pakistan's strategy ~6 · conclusion ~1

Outline

  • I. Introduction
  • II. Hormuz: why it matters
  • III. The 2026 disruption
  • IV. Geopolitical consequences
    1. Chokepoints as weapons
    2. Erosion of US security guarantees; Gulf hedging
    3. Winners and losers among producers
    4. Asia's vulnerability; China's position
    5. Acceleration of the energy transition
  • V. Economic consequences
    • A. Global
    • B. Pakistan
  • VI. Strategy for Pakistan's energy security
  • VII. Conclusion

Model Answer

I. Introduction

  • Energy has shaped geopolitics since the 1973 oil embargo. In 2026, the Iran war closed the Strait of Hormuz, and the International Energy Agency called it the largest supply disruption in the history of the global oil market.
  • Thesis: the crisis showed that chokepoints can be used as weapons, weakened confidence in US security guarantees, and pushed the world toward faster diversification. For Pakistan, which imports most of its oil and LNG through the Gulf, it exposed a dangerous vulnerability. Energy security must become national security.

II. Hormuz: why it matters

  • About 20% of world oil trade and about 20% of global LNG normally pass through the strait.
  • Major exporters (Saudi Arabia, Iraq, the UAE, Kuwait, Qatar, Iran) depend on it; major buyers are in Asia (China, India, Japan, South Korea, Pakistan).

III. The 2026 disruption

  • Iran closed the strait after the US–Israeli strikes (from March 2026). Over 150 ships were stranded, and insurance became unavailable.
  • Supply losses: about 10.1 million barrels a day in March, reaching about 12.8 million by April.
  • Prices: Brent peaked near **120∗∗inMarch,easedtothehigh120** in March, eased to the high 80s–90s after the June MoU, then climbed to near $95 when fighting resumed (September).
  • LNG: Qatari and Emirati exports collapsed. Fertiliser prices rose about 31%, threatening food security.
  • A "dual blockade": the US naval blockade of Iranian ships (from 13 April, reimposed 15 July) alongside Iran's control claims and attempted transit fees.

IV. Geopolitical consequences

  • 1. Chokepoints as weapons: Hormuz became a bargaining chip, with Iran demanding transit fees. Bab el-Mandeb (the Houthis) and Malacca now look equally risky.
  • 2. Erosion of the US umbrella: Gulf producers were hit despite US bases, which led to hedging such as the Makkah Joint Defence Agreement (August 2026) and outreach to China.
  • 3. Winners and losers:
    • Winners: non-Gulf producers (the US, Russia, Kazakhstan, Brazil, Norway). US shale activity rose.
    • Losers: Gulf exporters lost volumes; Asian importers paid more.
    • Russia gained revenue and leverage despite sanctions.
  • 4. Asia's exposure: China, India, Japan and Pakistan were hit hardest. China's strategic reserves and pipelines (Russia, Central Asia, Myanmar) gave it a cushion that others lacked.
  • 5. The energy transition sped up: countries now treat renewables and efficiency as security tools, not only climate tools.

V. Economic consequences

  • A. Global
    • An inflation spike and stagflation risk, with comparisons to the 1970s.
    • Currency pressure and fuel shortages in import-dependent developing states (panic buying in Vietnam).
    • Food insecurity through fertiliser and transport costs.
    • Shipping and insurance costs soared.
  • B. Pakistan
    • About 90% of its oil comes through the Gulf; LNG largely from Qatar.
    • Petrol reached PKR 458.40 per litre by April 2026, about a 40% monthly rise.
    • Emergency austerity: a four-day working week, school closures and energy restrictions.
    • Operation Muhafiz-ul-Bahr: the Navy escorted merchant ships.
    • Wider damage: a bigger import bill, pressure on reserves and the IMF programme, higher inflation and risks to Gulf remittances.

VI. Strategy for Pakistan's energy security

  1. Diversify sources and routes: suppliers outside the Gulf; overland options (TAPI, CASA-1000 for power); revisit Iran gas within the sanctions framework when possible.
  2. Build strategic reserves: Pakistan's oil storage covers only a few weeks. Build reserves of at least 60–90 days.
  3. Local energy first:
    • Hydropower (Diamer-Bhasha, Dasu, Mohmand).
    • Thar coal for baseload, managed for emissions.
    • Domestic gas exploration.
  4. Accelerate renewables: the rooftop solar boom showed demand. Add grid-scale solar and wind plus storage, and fix net-metering policy so the grid survives.
  5. Efficiency and demand management: efficient appliances, fuel standards, public transport and electric two- and three-wheelers.
  6. Fix the power sector's finances: circular debt, losses in the distribution companies, IPP contracts.
  7. Energy diplomacy: long-term contracts with Qatar and Azerbaijan, Saudi deferred-oil facilities, and Central Asian links through Afghanistan when stable.
  8. An institutional crisis plan: a standing energy emergency framework and fuel-rationing rules.

VII. Conclusion

  • The 2026 crisis proved that whoever controls chokepoints can hold the world economy hostage.
  • For Pakistan, a few weeks of closure meant soaring prices, a four-day week and naval escorts. Energy security can't be left to the Strait of Hormuz: it must be built at home through local resources, reserves, renewables and smart diplomacy.

Key facts to memorise

  • Hormuz carries about 20% of world oil and about 20% of LNG.
  • Supply loss: about 10.1 million barrels a day (March 2026). Brent peak near 120∗∗(March);near∗∗120** (March); near **95 (September).
  • US blockade of Iranian ships: 13 April 2026, reimposed 15 July.
  • Pakistan: petrol PKR 458.40 (April); Operation Muhafiz-ul-Bahr (9 March 2026).

Possible variations

  • Energy as a geopolitical weapon: discuss with reference to Hormuz and the Russia–Europe case.
  • How can Pakistan reduce its dependence on imported fuel?
  • The geopolitics of the energy transition and critical minerals.