Festive music from the band Sweet Crude blared at a party minutes after President Donald Trump’s former defense secretary warned that ending the war now would cede ownership of the narrow Strait of Hormuz—the world’s most critical choke point—to Iran.
“We’re in a tough spot, ladies and gentlemen,” said retired Gen. Jim Mattis at the CERAWeek by S&P Global conference in Houston. “I can’t identify a lot of options.”
The dichotomy of the celebratory, yet nerve-wracking vibes dominated the unofficial “Davos of energy” event this week that still attracted a record of over 11,000 attendees from 90 countries—a veritable who’s who of the energy sector around the world—not counting the fossil fuel protestors outside.
The mood was meant to be triumphant. There’s ongoing crude oil and gas growth, but most prominent is the unprecedented wave of electricity demand from AI, triggering an infrastructure boom for pipelines, export hubs, and power, including gas-fired generation, renewables, nuclear, and more—truly an all-of-the-above energy renaissance that could still suffer from geopolitical turmoil.
So, the extension of the unexpected Iran war overshadows everything. The industry still cannot come to grips with the previously unfathomable scenario of the strait staying shuttered for a prolonged period of time. The Strait of Hormuz is the narrow, precarious waterway between Iran and the Musandam Peninsula through which flows roughly 20% of the world’s oil and natural gas, fertilizer for agriculture, helium for semiconductors, and petrochemicals that go into almost everything. Much of the world, especially in developing Asia, is already suffering the consequences and the ripple effects will continue to spread the longer the war draws out.
“There’s a lot of somber talk,” said Arjun Murti, energy macro and policy partner at the Veriten research and investment firm. “The strait does need to open in some fashion pretty soon. It’s not good for anybody.”
Even if American oil, gas, and chemicals producers rake in higher profit margins for now, they’ll suffer from the volatility and longer-term demand destruction later, especially if a global recession—or worse—takes hold.
Iran dominated the news so much that Venezuela seems like old news. The in-person appearance at CERAWeek of Venezuelan opposition leader and Nobel Peace Prize winner María Corina Machado was almost an afterthought. The four-hour-long security lines at Houston’s airports were a much more prominent topic of conversation.
With oil prices trading above $100 per barrel—up about 75% since the beginning of the year—Chevron CEO Mike Wirth warned the real impacts are only starting to take hold and that commodities remain underpriced. “There are very real physical manifestations of the closure of the Strait of Hormuz that are working their way around the world through the system that I don’t think are fully priced in,” he said, adding that markets are trading off “scant information.”
Shell CEO Wael Sawan said energy supply shortfalls could hit Europe very soon. Releases of emergency oil supplies only fill part of the gap. “South Asia was first to get that brunt. That’s moved to Southeast Asia, Northeast Asia, and then more so into Europe as we get into April.”
The Dow chemical CEO said the inflationary effects will extend at least through the end of this year. “The die is being cast for the rest of the year for what’s going to happen in the markets,” said CEO Jim Fitterling. “It’s like the unwind we saw on supply chains during COVID.”
Jack Fusco, CEO of Cheniere Energy—now the leading liquefied natural gas exporter in the world as a result of Qatar’s supplies being severely damaged and offline—said the final waterborne shipments from before the war from Qatar just made landfall, so the physical shortfalls are only beginning. “I don’t think you’ve seen a real impact just as of yet,” Fusco said, adding that he’s literally taking phone calls of “Help!” from Asia.
Political massaging
Key members of the Trump administration trekked to Houston, including Energy Secretary Chris Wright and Interior Secretary Doug Burgum, attempting to assuage the concerns of industry leaders and encourage them to produce more oil and gas.
This occurred as President Trump declared the war won—while sending more troops to the Persian Gulf for a potential escalation—and said oil prices would quickly fall again, which doesn’t exactly motivate more oil production.
“Markets do what markets do,” said Wright, a former oil and gas CEO, arguing that “prices have not risen enough yet to drive meaningful demand destruction.”
“It’s short-term disruption right now, but to end a multi-decadal problem and lead to a world that’s much more peaceful, can be much more prosperous, and much more securely energized,” Wright told the CERAWeek audience.
The next day, Wright, who remained in Houston most of the week, said investors are wrong when they pigeonhole energy as a single sector.
“Energy is not one sector. Energy is the enabler of absolutely everything we do,” Wright said. “Energy is life.”
That sentiment is exactly what makes everyone so nervous about the continuation of the Iran war—one started by the U.S. and Israel—and the greatest energy supply shock in history.
There’s a sense of a freeze across the energy industry, stifling long-term planning—except for examining many potential scenarios—and allowing for only short-term operational adjustments. Many top CEOs avoided interviews outside of the main stage for fear of speculating on the war and politics. Houston-based Exxon Mobil CEO Darren Woods didn’t come at all. And top Middle Eastern leaders, such as the CEO of Saudi Aramco, canceled their travel plans.
Some sent recorded video messages instead. Sultan Ahmed Al Jaber, the CEO of the Abu Dhabi National Oil Company (ADNOC), accused Iran of “choking the throat” of the “global economy.”
“Weaponizing the Strait of Hormuz is not an act of aggression against one nation. It’s economic terrorism against every nation,” Al Jaber said. “And no country should be allowed to hold Hormuz hostage. Not now, not ever.”
Kuwait Petroleum CEO Sheikh Nawaf al-Sabah said he is “outraged” by Iran’s unprovoked counterattacks against its Gulf neighbors. Kuwait and Iraq have already shut off most of their oil production, while Saudi Arabia and the United Arab Emirates have implemented major cutbacks as well.
“It’s a domino effect,” al-Sabah said. “The costs of this war don’t stay within geographical lines in this region. They extend all the way through the supply chain.”
The unknowns are really what’s scariest, said Veriten founder and CEO Maynard Holt.
“You have this confluence of factors—an administration keeping a very tight circle to maintain the element of surprise, the Europeans taking a limited role, energy players and various other Middle East actors deciding not to speculate in public, all with a backdrop of a potentially calamitous extended blockage of Hormuz,” Holt told Fortune.
“That whole stew just raises the overall anxiety while also limiting the public discussion.”
The recent CERAWeek by S&P Global conference in Houston was characterized by a juxtaposition of festive energy and underlying tension, particularly stemming from geopolitical instability in the Middle East. The event, often referred to as the « Davos of energy, » attracted over 11,000 attendees from 90 countries, highlighting the importance of the energy sector. However, the celebratory atmosphere was overshadowed by discussions about the ongoing Iran war and its implications for global energy supplies.
Retired General Jim Mattis, former defense secretary under President Donald Trump, emphasized the precarious situation regarding the Strait of Hormuz during his speech. This narrow waterway is crucial for global oil and gas transport, accounting for approximately 20% of the world’s energy supply. Mattis expressed concern that ending the conflict without a clear resolution would effectively hand control of the strait to Iran, which could have severe consequences for energy markets and international stability.
The energy industry is currently facing a dual reality. On one hand, there is significant growth in crude oil and gas production, alongside surging electricity demand driven by advancements in artificial intelligence. This has spurred an infrastructure boom, creating a diverse array of energy solutions, including renewables, nuclear, and gas-fired generation. Yet, the shadow of the Iran conflict looms large, as industry leaders grapple with the potential long-term ramifications of a sustained closure of the Strait of Hormuz.
As oil prices soar above $100 per barrel—up substantially since the year began—industry executives warned of serious supply chain disruptions. Chevron’s CEO, Mike Wirth, pointed out that the market has not fully accounted for the physical impacts of the strait’s closure, which are beginning to manifest globally. Shell’s CEO, Wael Sawan, reiterated concerns that energy shortfalls could imminently affect Europe, while Dow Chemical’s CEO, Jim Fitterling, indicated that inflationary pressures from these disruptions would likely persist throughout the year.
Cheniere Energy’s CEO, Jack Fusco, noted that the repercussions of the war are just starting to be felt, as the last shipments from Qatar before the conflict reached their destinations. The industry’s short-term profits are overshadowed by fears of volatility and potential demand destruction, especially if a global recession occurs.
Political figures from the Trump administration attended the conference in an effort to encourage increased oil and gas production. Energy Secretary Chris Wright attempted to alleviate concerns by suggesting that the current market disruptions are temporary. However, his remarks were met with skepticism, as industry leaders recognize the complexity of the situation. Wright’s assertion that energy is the foundation of all economic activity reflects the industry’s deep concern over the continuing conflict and its potential to disrupt global markets.
As the Iran war evolves, the energy sector appears to be in a state of paralysis when it comes to long-term planning. Many executives avoided discussing the situation publicly, opting instead to send recorded messages or remain silent on sensitive topics. This hesitance reflects the uncertainty surrounding the conflict and its implications for global energy stability.
Sultan Ahmed Al Jaber, CEO of the Abu Dhabi National Oil Company, condemned Iran’s actions, describing them as economic terrorism that threatens the global economy. Kuwait Petroleum’s CEO echoed this sentiment, expressing outrage over Iran’s aggressive posture and highlighting the broad impact of the conflict on the region’s oil production capabilities.
The uncertainty surrounding the Iran war and the potential for an extended closure of the Strait of Hormuz is a significant source of anxiety within the energy sector. Veriten’s CEO, Maynard Holt, noted the complex interplay of factors at play, including a U.S. administration that is tight-lipped about its strategies, limited European involvement, and a general reluctance among energy leaders to speculate publicly about the future.
The overall atmosphere at CERAWeek was one of cautious optimism mixed with significant trepidation. While there is a recognition of the ongoing energy renaissance, the specter of geopolitical turmoil is a constant concern. As industry leaders navigate these challenges, they must balance immediate operational adjustments with the need for strategic long-term planning in an increasingly volatile global energy landscape. The ripple effects of the Iran conflict will likely continue to be felt for the foreseeable future, influencing energy markets and geopolitical dynamics across the globe.
