The prolonged disruption of shipping through the Strait of Hormuz as a result of the war in Iran is reshaping discussions around energy security, highlighting the vulnerability of global fossil fuel supply chains.
Roughly one-fifth of global oil consumption passes through the Strait of Hormuz, while major liquefied natural gas exports from Qatar also rely on the route, according to Reuters. The conflict has amplified concerns about the risks associated with concentrating such a large share of global energy trade in a single strategic corridor.
Against that backdrop, energy executives and analysts gathered at the Eurelectric Power Summit in Helsinki this week argued that the crisis has altered traditional assumptions about energy security. For years, renewable energy sources were often criticized for intermittency challenges tied to weather conditions, while oil and gas were generally viewed as reliable sources of supply.
That narrative is now being challenged as geopolitical tensions expose the fragility of international fossil fuel supply chains, several industry leaders told CNBC.
Kingsmill Bond, an energy strategist at clean energy think tank Ember, said the current crisis has highlighted how fossil fuel supplies can become uncertain during periods of geopolitical instability. Bond said that renewable technologies, supported by battery storage systems, increasingly offer a more stable source of domestically generated power.
The debate has gained urgency across Europe and Asia, regions that remain heavily dependent on imported energy. The economic consequences of higher fuel costs have extended beyond energy markets, contributing to concerns about inflation and broader economic pressures.
The effects have been particularly pronounced in financial markets. Commodity-focused hedge funds and quantitative trading firms have benefited from heightened volatility in oil markets as investors respond to rapidly changing supply expectations. Trend-following strategies have generated strong returns amid sharp movements in crude prices, according to a separate report from CNBC examining the market fallout from the conflict.
Recent economic research suggests, however, that higher oil prices may not have the same effect on employment as they did during previous energy crises. Research highlighted by Axios, citing findings from the Federal Reserve Bank of Boston, found that the U.S. economy has become less vulnerable to oil shocks than it was during the 1970s because energy now represents a smaller share of overall economic activity.
The study found that while rising fuel costs can still contribute to inflationary pressures, labor markets appear more resilient to energy price spikes than in previous decades.
At the industry level, executives argue that the latest disruption has renewed focus on the value of domestically produced electricity. Markus Rauramo, chief executive of Finnish energy company Fortum, told CNBC that reducing dependence on imported fossil fuels requires greater investment in locally generated clean electricity. He acknowledged, however, that moving away from gas remains a significant challenge for households and industries that rely heavily on existing fossil fuel infrastructure.
Statkraft Chief Executive Birgitte Ringstad Vartdal similarly pointed to advances in battery technology as an important factor in the changing energy landscape. Falling battery costs and longer storage durations have improved the ability of renewable energy systems to balance supply and demand, she told CNBC.
Some analysts warn that replacing one source of imported fuel with another does not eliminate geopolitical risks. Jan Rosenow, a professor of energy and climate policy at the University of Oxford, told the outlet that Europe is likely to rely more heavily on U.S. LNG supplies as disruptions continue to affect global gas markets. He noted that domestically generated renewable electricity is less exposed to the political and logistical risks that can accompany international fuel trade.
