Is the world heading for a deeper energy crisis than in the 1970s?

A month-long closure of the Strait of Hormuz, a crucial waterway for global oil shipments, has affected the flow of energy supplies, prompting warnings from experts about potential long-term impacts.

The disruption of this key global energy route has raised concerns that the world could face a crisis more severe than the oil shocks of the 1970s, reports BBC.

Lars Jensen, a shipping expert and former director at Maersk, told the BBC that the effects of the ongoing US-Israeli war involving Iran could be "substantially larger" than the economic disruption seen in the 1970s.

His remarks follow earlier comments by International Energy Agency director Fatih Birol, who said the world is "facing the greatest global energy security threat in history".

"It is much bigger than what we had in the 1970s, the oil price shocks. It is also bigger than the natural gas price shock we have experienced after Russia's invasion of Ukraine," he said.

However, some analysts say that despite the disruption, the global energy system today is more resilient than it was decades ago.

1970s crisis driven by policy decisions

The oil crisis of the 1970s differed in key ways from the current situation, economists say.

Dr Carol Nakhle, chief executive of Crystol Energy, told the BBC that the earlier crisis was largely the result of deliberate political decisions.

In October 1973, Arab oil producers imposed an embargo on countries led by the United States due to their support for Israel during the Yom Kippur war, along with coordinated cuts in oil production.

"The result was a near quadrupling of oil prices within a few months," Nakhle said.

This led to fuel shortages in major economies and triggered what she described as a "global economic and financial crisis" with long-term consequences.

Dr Tiarnán Heaney of Queen's University Belfast said the sharp rise in oil prices drove inflation, forcing businesses to cut costs and leading to rising unemployment, reports BBC.

"This had massive knock-on effects that damaged the social fabric of many countries with widespread strikes, unrest, and increases in poverty as many households struggled to make ends meet," he said.

The crisis contributed to recessions in both the United States and the United Kingdom between 1973 and 1975, and was also linked to political changes, including the fall of Ted Heath's government in 1974.

A second oil shock followed in 1979 during the Iranian Revolution.

Current disruption and risks ahead

In the present crisis, the Strait of Hormuz has effectively been closed to shipping traffic since the conflict began a month ago, disrupting the movement of oil and gas from Gulf countries, which typically account for about one-fifth of global oil exports.

Efforts have been made to restore the flow of energy supplies, including attempts by US President Donald Trump to ensure safe passage through the strait, reports BBC.

Jensen said that oil shipments already en route are still reaching global refineries, but warned that supplies could tighten further in the coming weeks.

"So the oil shortages we've been seeing, they're only going to get worse, even if magically the Strait of Hormuz would re-open tomorrow," he said.

"We will face massive energy costs, not just while this crisis goes on but also for six to 12 months after it's over."

Debate over severity compared to 1970s

Experts remain divided on whether the current situation could surpass the 1970s crisis in severity.

Nakhle said the global oil market is now more diversified and less dependent on oil than it was in the past.

"While the volumetric disruptions we are seeing are significant – arguably among the largest in recent history – the market is far more resilient than in the 1970s," she said.

"It is more diversified, less oil-intensive, and better equipped with buffers and emergency response mechanisms."

Heaney also noted that countries today are better prepared, with stronger economic understanding and larger strategic reserves, reports BBC.

However, others warn that the scale of disruption could make the current crisis more severe.

Alicia Garcia Herrero, chief economist for Asia Pacific at Natixis CIB, said the present situation affects around 20% of global oil supply, compared to a 5-7% reduction during the 1970s shocks.

"Today's Iran war crisis can end up being a bigger shock if the situation does not improve soon," she said.

"The fallout of this is that we could experience sharper price spikes, broader inflation pain, and deeper recession risks, especially in import-heavy Asia.

"Reserves and efficiency offer some buffer which the episodes in the 1970s lacked, but the raw scale of lost supply makes this nastier, with no fast fix in sight."