Energy This Week | The National

The ceasefire deadline, initially set to expire later today, has been postponed "indefinitely". Iran has been granted more time by the White House to come up with what the US President called "a unified proposal". But Tehran's grip on the Hormuz Strait has been tight, leading former Russian President Dmitry Medvedev to call the waterway Iran's "nuclear weapon".

Iran is said to have laid mines in the strait, making it dangerous for ships to pass. Apart from exacting tolls - in crypto and yuan - Tehran has a form of ownership over a ship's voyage. Even countries on Iran's "friendly" list have not been spared after two Indian tankers were fired at over the weekend. Following the extension of the ceasefire, the IRGC put more than one container vessel in its crosshairs early on Wednesday.

Earlier today, US Treasury Secretary Scott Bessent said the US blockade of Iranian ports will continue until Kharg Island storage fills and Iran's oil wells are forced to shut in what he called "Economic Fury". It's been more than 50 days since Hormuz has been blocked. Frustrations are growing that any outcome from US-Iran ceasefire talks would solidify Iran's control over the strait.

This week, I look into what the expiry of an unusual policy instrument - a waiver granted to India by the US to buy sanctioned Iranian oil - means for New Delhi, as well as the decline of Gulf jet fuel exports and the IMF's assessment of the impact of the Iran war.

As the US strikes against Iran continued in early March and oil surged past $100 a barrel, Washington reached for a strange tool - lifting sanctions on Iranian crude, but only for India. The 30-day exemption, described by Mr Bessent as a "stopgap measure", allowed New Delhi to resume Iranian oil imports for the first time since 2019. State-run Indian Oil Corporation was among the buyers, taking roughly two million barrels in its first Iranian crude purchase in seven years. Around four million barrels reached Indian ports under the waiver, with a further four to six million in transit by the deadline. The waiver expired on April 19 with no sign of renewal. The irony was hard to miss. The US was simultaneously bombing Iran and removing sanctions on its oil. Mr Bessent’s take on it was interesting. The White House was "using the Iranian barrels against Tehran to keep the price down,” he said.

The expiry of the US waiver allowing India to buy Iranian oil is expected to compound its ongoing fuel crisis. EPA

Bottom line: With the waiver gone and Iranian tankers now firing on Indian-flagged vessels, the country’s fuel crisis could potentially deepen. New Delhi imports roughly 67 per cent of its cooking gas - nearly all of it through Hormuz, with few alternatives available.

The Gulf's large role in keeping the world's planes flying has been one of the least-discussed casualties of the blockade. Before the war, the region supplied over a third of the world's jet fuel. That share collapsed to 8.2 per cent in March and was a mere 3.7 per cent in April, according to data from Kpler. China, typically the largest single buyer of Gulf jet fuel, has slipped to third in the import rankings. Except for one, the world’s 20 largest carriers have already cut flights for May.

Gulf exports overall: down 79%, from 605,000 bpd to 127,000 bpd
Kuwait, the world's second-largest supplier: down 97%
UAE: down 81% | Bahrain: down 61% | Oman: down 55%

Bottom line: The IEA warns Europe has roughly six weeks of jet fuel supplies remaining. The Strait accounts for 40 per cent of its imports, none of which have moved since the war began. Airfares are expected to rise 5 to 10 per cent, with surcharges already appearing ahead of the summer season.

Our Washington correspondent, Kyle Fitzgerald, who covered the IMF-World Bank spring meetings last week, summed up the institutional take on the economic impact of the closure of Hormuz in three words - “we don’t know.” With up to 10 million bpd of supply gone, the IMF published not just a reference forecast but two additional scenarios if the war drags on.

“It seems every day that passes without a ceasefire, the IMF warns we’re drifting closer and closer to this adverse scenario where global growth will slow even more, and inflation will go even higher.” For the Gulf states, the oil shock is atypical, he explains. “It didn't hit just the energy infrastructure, but it hits other parts of their revenue models.”

Bottom Line: The IMF has already cut global growth to 3.1% down from 3.3% in January, and says that number is likely already out of date. In the IMF’s severe scenario, which sees disruption extending into 2027, global growth falls to 2%, and inflation exceeds 6%.

Big number

Economic contraction, the IMF now forecasts for Iran in 2026. It’s a downgrade of 7.2 percentage points from modest growth forecast pre-war.

When an oil or gas well is temporarily closed, production is stopped. Unlike a permanent closure, a shut-in well can theoretically be brought back online.

April 28-29: FOMC meeting
May 4-7: Make it in the Emirates, Abu Dhabi