Middle East conflict and new global economic reset

The global economy is undergoing a structural reset driven by geopolitical conflicts, with energy markets becoming strategic weapons. The Ukraine-Russia war forced Europe to abandon decades of reliance on Russian gas, reducing Moscow’s share of European imports from over 40% to 15% by 2026, while the U.S. emerged as the top LNG supplier. This shift increased Europe’s energy costs, weakened industrial competitiveness, and accelerated inflation, as households faced higher utility bills. The Middle East crisis has deepened instability, turning the Strait of Hormuz—a critical route for 20% of global oil and LNG—into a flashpoint. Attacks on Gulf infrastructure and rising tensions have disrupted shipping, forcing vessels to take longer, costlier routes around Africa. Qatar’s LNG facilities have also been affected, further tightening supplies and pushing freight and insurance costs up worldwide. Asia’s major economies—China, India, Japan, and South Korea—are now scrambling to secure alternative energy sources amid renewed competition for LNG cargoes. The U.S. has strengthened its position as the world’s key energy supplier, surpassing Saudi Arabia in crude oil exports, while Russia redirects gas exports to Asia, though pipeline infrastructure limits quick adjustments. Rising energy costs are driving up prices for transportation, manufacturing, and food, reviving fears of stagflation reminiscent of the 1970s oil crisis. Globalization is fragmenting into competing blocs: a U.S.-led LNG system, a Russian-focused Asian network, and a volatile Middle Eastern oil corridor vulnerable to conflict. Supply chains, already strained by the pandemic and Ukraine war, are now being re-priced, undermining efficiency in favor of strategic security.