Iran war energy crisis: how bad could it get? – The Latest

0:00Jillian Ambrose:This is The Guardian.

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0:45Jillian Ambrose:There will be different players with different sensitivities to this crisis. It makes it a lot more complicated to negotiate. The U.S. blockade on Iran's cargoes, that will be a major blow to Tehran. Tonight, President Trump announcing the U.S. seized and boarded an Iranian cargo ship today. Posting on social media, the 900-foot Tuska tried to evade the U.S. blockade. The U.K. is more exposed than a lot of our neighbors. And it's ideally a lesson that would have been learned after the Russia-Ukraine crisis. But here we are in 2026 and we are debating the same things. Oil and gas prices have surged yet again after a re-escalation of hostilities in the Strait of Hormuz.

1:25and more uncertainty over the future of the US-Iran ceasefire. From The Guardians today in Focus, this is The Latest with me, Lucy Hoth. With me is Gillian Ambrose, our energy correspondent. Thanks so much for coming up to the studio, Gillian. It's great to have you on the show. It's a pleasure. So we are talking a day after this pretty extraordinary US attack and seizure of an Iranian flagship in the Strait of Hamuz as a result of this blockade that the US has imposed. There's been this footage that's sort of reminiscent of the attacks on Venezuelan ships at the start of the year. Trump proudly saying that US Marines were able to board and that they were able to blow open the side of the ship.

2:07But unfortunately, it's meant that we've arrived at work on Monday to more market jitters and a further surge in oil prices. Tell us what's happened.

2:17Jillian Ambrose:Absolutely. It was a really dramatic end to what turned out to be a very brief reprieve in the markets. There was a sort of feeling of, dare I say, relief on Friday afternoon when Iran said that they were going to open the straits. We saw prices plummet to the lowest they've been since the crisis began and closer to where prices were before the war began than the peak that we've seen at$119 a barrel. So there was a sense that, well, gosh, maybe this is the start of the end. Maybe this is something to be optimistic about. But as you say, that came to quite a spectacular end over the weekend. So first thing Monday morning, we've seen oil prices bounding back up 10%.

3:03Jillian Ambrose:We're back at$95 a barrel. And more importantly, I think we're plunged back into the uncertainty that has become a hallmark of the oil markets in the last few weeks. And meanwhile, we're supposed to have the second round of the so-called ceasefire talks happening in Pakistan. The US has indicated that it will be attending, but Iran has been much less clear about whether it intends to go. And of course, critical if those talks do take place is the Strait of Hormuz, which has become such a huge leverage in Iran's arsenal in terms of its power, in terms of its ability to disrupt the global economy and weaken the US.

3:42Jillian Ambrose:Exactly. This isn't how you'd want to start peace talks, but it's the situation that we find ourselves in. And one of the most troubling things to come out of this crisis is the extent to which Iran is now fully aware of how powerful it is. We've seen decades where they have threatened the Strait of Hormuz, where they've threatened the oil and gas which flows through it into the global economy. But this really has been the first time that they have fully tested their might as a nation over this really narrow waterway. And you can't put the genie back in the bottle after that. I think they know exactly how powerful they are.

4:20And that's not a situation that will be easy for the U.S.

4:23Jillian Ambrose:negotiators to go into. They are sitting opposite a very powerful adversary and they don't have a huge amount of leverage themselves. Yeah, I mean, arguably it has made Iran stronger or perhaps more aware of its economic capacity to cause this much disruption. So in terms of the economic impact and in terms of the sort of impasse that feels like it will be very difficult to come out of and, you know, yet more volatility in the markets and oil prices, as you've outlined, how much longer could we hold out in this situation and particularly looking at the US and Iran there, who both have, you know, fairly sizable reserves.

5:03but other economies don't.

5:06Jillian Ambrose:Well, exactly. This isn't a crisis of equals, I suppose. The US is a net exporter of energy. It is seeing prices going up domestically, so that will be a concern for Trump. But it's not going to run out of energy the way that we're seeing in some countries in Southeast Asia, for example. Europe is under a lot of pressure, particularly for fuels, things like jet fuels. So it's not equal. There will be different players with different sensitivities to this crisis. And that makes it a lot more complicated to negotiate. And what about Iran? Because the trade relationship with China is very important, isn't it?

5:41China imports 90 % of its oil from Iran. So that's going to have a huge impact on Iran's economy if this continues.

5:47Jillian Ambrose:Exactly. And I think, you know, Iran's oil exports are also the way that it's funding its aggression, its military aggression. So the US blockade on Iran's cargoes, which have been continuing throughout the crisis. That will be a major blow to Tehran. For China, it's less of an issue. They have a diverse range of supplies that they draw on. And they're also sitting on some of the biggest stores of crude. They've spent most of the last 18 months quietly storing barrels of oil when it was cheaper. So they do have a large contingency to draw from. But really, everyone in the global economy is calling for one thing, And that is for flows to resume through the Strait of Hormuz as normal.

6:32Jillian Ambrose:That's what's needed to get things back on track. Because there is just so much volatility, isn't there? And I wonder if you can tell me about some of the ways that this is already cropping up. I mean, you mentioned Southeast Asia, but it's also airlines who are being very badly hit, aren't there? There are real risks of mass flight cancellations. Airlines have really suffered in terms of a fall in their share price today, haven't they? Exactly. I think airlines are in a particularly difficult situation because their business model is so forward looking. And that's the one thing we don't have certainty on is how long is this going to last?

7:05Jillian Ambrose:Are we talking about disruption or higher costs for the summer or are we talking much longer? For a business that's built on anticipating demand and anticipating services, you know, months, sometimes years in advance, this will be really difficult for airlines to navigate. I think that for them we're going to see this crisis drag on quite a lot longer. Here in the UK we are particularly vulnerable aren't we? I mean there's been warnings that we're sort of flirting with a recession that a quarter of a million people could lose their jobs by the middle of next year. Why is the UK so particularly vulnerable compared to other similar economies in the G7 or G20?

7:45Jillian Ambrose:Yeah the UK is more exposed than a lot of our neighbours and And it all comes down to our reliance on gas. Obviously, back in the day, we had a lot of North Sea gas that we could rely on. But as now a net importer, you don't want to be as reliant on gas as the UK is. So for example, we're seeing even our electricity prices are much higher than our neighbours in France and other countries. And that's because around 30 % of our electricity is generated in gas power plants. So that price feeds straight through. and the highest price in the market is what sets the price for the whole market. So we have gas setting the price for our electricity.

8:22Jillian Ambrose:We also have gas in 23 million homes in our boilers, heating our water, warming our homes. We are very exposed to gas as a commodity and this is something that the government has talked a lot about. We need to move to renewables. We need to weaken this link between gas costs and electricity costs. And it's ideally a lesson that would have been learned after the Russia-Ukraine crisis. But here we are in 2026 and we are debating the same things. How do we de-link gas from electricity? How do we make sure that cheap renewable energy is setting the price, not expensive imported gas? We're expecting Ed Miliband to deliver on his promise to bring costs down.

9:07Yeah, who is speaking tomorrow, we should say, in quite a major speech to sort of outline how the government intends to respond to this moving forward.

9:16Jillian Ambrose:Absolutely. I think that is very keenly anticipated. And there are levers that the government can pull. I don't want to preempt what he might say, but we will be keenly watching. There are things that the government can do to speed up how quickly we can shrug off our reliance on gas. But there are often unintended consequences when you start intervening in the market. So that's something that the government will be keenly aware of. A very complex situation, Gillian. Thank you so much for explaining it to us with such clarity. And thank you for your time. Thank you. That's it for today. My huge thanks again to Gillian Ambrose, The Guardian's energy correspondent.

9:53You can keep up with her excellent reporting over at theguardian.com, including a very useful explainer on the disruption to energy supply chains and why they've been particularly damaging to the UK. And don't miss a special episode of Politics Weekly, which will be in your feeds tonight with our political editor, Pippa Creera, and our policy editor, Kieran Stacey, who will be looking at the fallout from The Guardian's extraordinary exclusive on Peter Mandelson's failed security vetting. That's it for today. Thanks for listening to this episode of The Latest. Today in Focus will be back in your feeds tomorrow morning.

10:25The Latest will be back tomorrow night. This episode was presented by me, Lucy Hoff. It was produced by Bryony Moore. The senior producer was Ryan Ramgobin and the lead producer was Zoe Hitch.

10:39Jillian Ambrose:This is The Guardian.

11:06and I can keep track from my phone while I get the job done. No spreadsheet in sight. What a life. Do right by yourself and your business and search XERO for your free trial. Conditions apply.