The 2026 U.S.-Iran War and the Global Energy Crisis

Chapter 25: The Genealogy of Energy Weaponization

25.1 The 1973 Arab Oil Embargo

October 6, 1973,Yom Kippur, the Jewish Day of Atonement. Egyptian forces crossed the Suez Canal and Syrian forces breached the Golan Heights. Israel was driven back. Five days later, on October 12, President Richard Nixon approved a massive military airlift to Israel. Hundreds of C-5A Galaxy and C-141 Starlifter transport aircraft took off from air bases across the United States bound for Tel Aviv. The operation was named Nickel Grass. Tanks, ammunition, and missiles poured into the desert across an aerial bridge.

King Faisal of Saudi Arabia was watching the news. On October 19, Nixon requested 2.2 billion dollars in emergency aid to Israel from Congress. That same day, the Organization of Arab Petroleum Exporting Countries (OAPEC) held a ministerial meeting in Kuwait. The decision had already been made. Complete halt to oil exports to nations supporting Israel. Production would be cut by 5 percent each month. Until Israel withdrew from occupied territories.

This was the first moment energy was wielded as a weapon to force foreign policy.

Before the embargo began, the global oil market looked nothing like it does today. Until the 1960s, international oil prices were controlled by seven major Western petroleum companies, the so-called Seven Sisters. Exxon, Mobil, Chevron, Texaco, Gulf Oil, BP, and Royal Dutch Shell. Oil-producing nations could not set the price of oil drawn from their own soil. OPEC was founded in 1960, but for more than a decade it remained powerless against the Western companies' dominance.

Meanwhile, American oil consumption was climbing. In 1950, U.S. oil imports were under 500,000 barrels per day, accounting for only 8 percent of domestic consumption. By 1973, imports had grown to 19 percent of domestic consumption. The United States burned one-third of the world's oil supply while its own production had peaked in 1970 and was declining. Suburban homes, high-displacement automobiles, and energy-intensive manufacturing,the entire American structure had been built on cheap and abundant oil. All of it hung on a single valve in the Middle East.

When OAPEC closed the valve, the actual volume of oil that vanished represented roughly 7 percent of global supply. About 7 percent of American oil imports. In absolute terms, the quantity was not catastrophic. Market panic moved faster than the embargo itself.

Crude prices jumped from 2.90 dollars per barrel to 11.65 dollars per barrel by January 1974. A fourfold leap. Lines of vehicles stretched outside gas stations across America, and 'No Gas' signs became routine. Congress passed the Emergency Petroleum Allocation Act, imposing mandatory rationing, and an odd-even system went into effect,drivers could refuel only on certain days based on their license plate number. Stagflation gripped the Western world. U.S. inflation rocketed from 3.3 percent in 1972 to 11 percent in 1974.

The shock reached far beyond America. By November, Arab oil production had fallen 25 percent from September, and Middle East exports to the West dropped 60 to 70 percent. Japan and Western European nations capitulated to Arab pressure, hastily issuing pro-Arab statements. State Department records estimate that oil import costs for France and Italy each rose by 1.5 billion dollars. Cracks widened between the United States and its European allies. Europe blamed American support for Israel for triggering the embargo, while America accused Europe of surrendering too readily to Arab coercion.

In March 1974, as disagreement festered within OAPEC, the embargo ended. Five months of oil cuts were over, yet prices remained high. What those five months left behind was structural change far deeper than the price spike.

First change. To prevent future crises, the United States created the International Energy Agency (IEA) in 1974 alongside other industrialized nations. Members established a system to jointly release oil reserves during emergencies. The U.S. launched the Strategic Petroleum Reserve (SPR), storing hundreds of millions of barrels of crude in vast underground salt caves in Louisiana and Texas. Energy security as a concept was born in that moment.

The second change mattered more. In 1974, Secretary of State Henry Kissinger and the Saudi royal family conducted a series of high-level talks. Treasury Secretary William Simon and his aide Jerry Parsky reached a secret accord with Saudi officials. The existence of this agreement remained hidden until 2016, when Bloomberg obtained it through a Freedom of Information Act request. The core bargain: America would guarantee Saudi Arabia's security and supply weapons. Saudi Arabia would invoice oil sales in U.S. dollars and invest surplus oil revenues into American Treasury bonds. By 1975, all OPEC members followed Saudi Arabia's lead. The petrodollar system had been born.

Any nation seeking oil had to acquire dollars first. Central banks worldwide built dollar reserves. Oil states recycled their massive dollar surpluses back into American Treasury securities. Kissinger called this loop 'petrodollar recycling.' America could run enormous budget deficits while keeping rates low, and the dollar preserved its status as the world's reserve currency even after gold convertibility ended.

The 1973 embargo was a short-term win for Arab oil states. It shook Western diplomacy and quadrupled crude prices. Long term, it catalyzed something else: the United States linked oil and the dollar to build a financial system of global dominance. America filled the gap opened by the Arab valve with its own architecture of power.

Energy weaponization's first model. The producer nation closes the valve. This approach remained the template for fifty years.

25.2 Russian Gas in 2022

One June day in 2022, German Economy Minister Robert Habeck told reporters that Nord Stream 1 was 'operating entirely normally' and Russia's technical complaints did not hold up. By then, Gazprom, Russia's state gas monopoly, had already reduced flow through Nord Stream to 40 percent of usual levels. A month later, it fell to 20 percent. The reason: turbine repairs. Russia claimed sanctions prevented Canada from returning a Siemens turbine under maintenance. Siemens Energy denied ever receiving a repair request from Gazprom.

Russia's gas weaponization differed fundamentally from the Arab oil embargo of 1973. The Arabs shut the valve once. Announce, execute, done. Russia turned the valve slowly. To 40 percent, to 20 percent, to 0 percent. Citing technical pretexts. Implying gas might flow again if sanctions were lifted. This was not open warfare but attrition. A race against winter,to starve European storage tanks before cold arrived.

The reason this weapon worked lay in the structural fragility Germany and Europe had created.

After the Cold War, Germany and Europe embraced 'change through trade' (Wandel durch Handel). Economic ties would transform Russia toward democracy and markets, they believed. After Japan's Fukushima disaster in 2011, Germany shuttered all nuclear plants. Coal generation fell too. Natural gas became the bridge fuel to bridge renewables' intermittency,the gaps when wind dies and sun hides. That gas came from Russia.

Before war, Germany relied on Russia for over half its natural gas, one-third of its oil, and roughly half its coal. Nord Stream,a pipeline beneath the Baltic linking Russia and Germany directly,was engineered to bypass Eastern Europe. Poland and Ukraine warned it would become a geopolitical sword. Germany pushed forward anyway, calling it merely commerce.

February 24, 2022: Russia invaded Ukraine. The West answered with historic financial sanctions. Putin turned the pipeline valve.

Weaponization unfolded in stages. First, March and April: gas to Poland and Finland, which had refused ruble payments, was cut. May: Yamal pipeline halted. June: Nord Stream 1 throttled to 40 percent. July: 20 percent. Late August, Gazprom closed Nord Stream 1 for 'maintenance.' Gas never resumed. September 2,the very day G7 agreed to cap Russian oil prices,Gazprom announced indefinite Nord Stream 1 suspension. An oil leak was the excuse.

Kremlin spokesman Dmitry Peskov stated plainly: gas would resume only if sanctions were lifted. Europe's support for Ukraine meant winter without heat.

September 26: explosions ripped through the Baltic. Three of four Nord Stream 1 and Nord Stream 2 pipeline legs were destroyed. The physical and symbolic cord binding Europe and Russia had been severed for good.

Prices erupted. European wholesale natural gas (TTF benchmark) exceeded 300 euros per megawatt-hour. Ten times pre-war levels. Electricity rates soared in tandem. The European Power Benchmark hit 339 euros per MWh in Q3 2022. That was 222 percent higher than the year before.

Factories shut down. Uniper, Germany's largest utility, recorded a 40 billion euro loss. The worst in German corporate history. Germany's government assembled a 200 billion euro rescue package and nationalized Uniper. Chemical giants like BASF announced they would move production abroad. Glass, fertilizers, steel,industries that hunger for energy took direct hits.

Europe, bereft of pipeline gas, chased LNG across the ocean. Germany fast-tracked laws to rapidly install floating LNG regasification units (FSRU). A new floating terminal sprouted in Amsterdam. European LNG imports surged 89 percent year-over-year in Q3 2022 to 32 billion cubic meters.

The cost of Europe's LNG scramble was borne by poorer nations. As Europe outbid everyone for cargo ships, Pakistan and Bangladesh lost auctions. Sri Lanka's grid collapsed. Russia's pipeline weapon, shot at Europe, rode the wind as blackouts across South Asia.

Russian pipeline gas imports fell 69 billion cubic meters between January and November 2022 compared to the year prior. Even counting surging LNG, total Russian gas imports fell 64 billion cubic meters. Nord Stream 1 fell 85 percent; Belarus-route supply dropped 96 percent.

Europe endured. A milder-than-expected winter, LNG sourcing diversity, and EU-mandated 15 percent gas cuts (actual cuts: 20.1 percent) converged. But Russia paid too. Pipeline gas cannot be loaded onto ships and sold elsewhere as oil can. Russia lost its largest, most reliable market forever. Europe's Russian gas dependence fell from 40 percent pre-war to roughly 15 percent by year-end 2023.

The 2022 energy weaponization was a step beyond 1973's valve control. Producers directly commanded infrastructure (pipelines) and alternated technical excuses with political demands, strangling consumers inch by inch. Europe's bill for this lesson,hundreds of billions of euros,taught a hard truth: entrusting national energy to rigid pipelines is a perilous wager.

25.3 Hormuz in 2026

March 2, 2026: an Iranian Islamic Revolutionary Guard Corps (IRGC) official released a statement via state media. 'The strait is closed. Anyone attempting passage will have their ship set ablaze by the Revolutionary Guard and our navy heroes.'

The message's audience was not tanker captains. It was underwriters in London and Zurich.

Within 72 hours of Operation Epic Fury,the U.S.-Israeli strike on Iran on February 28,seven of twelve P&I Clubs, which control 90 percent of marine insurance, cancelled war risk coverage for the Strait of Hormuz. War risk premiums, 0.125 to 0.25 percent of vessel value before conflict, soared to 5 to 10 percent. A hundred-million-dollar supertanker passing through the strait once would now cost millions extra in insurance. Norway's Gard and Skuld, Britain's NorthStandard and London P&I, and New York's American Club all rejected war risk underwriting.

Without insurance, ships cannot sail. Even if owners accepted risk, no insurance meant no port entry and no cargo acceptance. Daily traffic through the strait,138 vessels pre-war,fell below four by March 5. A collapse exceeding 95 percent. Around 200 ships lay stranded in Gulf waters, and 40,000 sailors were trapped at sea.

Iran did not unleash a navy. No mine-laying campaign. Just drones and radio warnings. Over three weeks, roughly 20 confirmed attacks. Six deaths. The Iran-Iraq tanker war, 1980 to 1988, saw both sides strike over 400 vessels. The 2026 campaign achieved vastly greater strategic force with far less violence.

The secret lived in insurance mechanics. Marine insurance operates in binary. Present or absent. Insurance exists, ships move. Insurance gone, they stop. Iran grasped this binary perfectly. Sinking vessels was unnecessary. Only making the risk unbearable for underwriters mattered. The tanker Skylight's attack near Musandam killing two Indian sailors. The drone boat strike on MKD VYOM igniting an engine room fire. These sufficed. Economic blockade completed before physical blockade began.

Here, 2026's weaponization parts decisively from both 1973 and 2022.

In 1973, Saudi Arabia refused to supply oil from its own land. In 2022, Russia said it would stop gas flowing through its own pipelines. In both cases, what was weaponized was a nation's own produced resources.

In 2026, Iran did not weaponize its own oil. Instead, in the two weeks before the war, Iran tripled its oil exports to secure cash in advance. What Iran weaponized was the 21-mile strait itself, the sole outlet through which Saudi Arabia, Kuwait, the UAE, Iraq, and Qatar export their oil and gas to the global market. According to the IEA, in 2025, approximately 20 million barrels of crude oil and petroleum products passed through the Strait of Hormuz daily. About one-third of global maritime oil transport and a significant portion of global LNG trade flowed through this narrow waterway.

Iran did not block this strait. It privatized it. Rather than completely sealing off the waterway, Iran declared 'selective opening'. It would allow passage through an alternate route via Iranian waters only to ships from nations not in hostile relations with the United States and Israel. The price was passage fees of millions of dollars per vessel. The payment currency was not the U.S. dollar but the Chinese yuan. Transactions were processed through China's Cross-Border Interbank Payment System (CIPS).

The IEA decided to release 400 million barrels of strategic reserves, the largest amount in history. The United States announced it would release 172 million barrels from its own Strategic Petroleum Reserve. France released 14.5 million barrels, South Korea 22.46 million barrels, Germany approximately 19.7 million barrels, and the United Kingdom 13.5 million barrels. This surpassed the 182.7 million barrels released during Russia's 2022 invasion by more than double.

Yet the market was unforgiving. 400 million barrels amounted to only about 4 days' worth of global daily production, about 16 days' worth of flow through the Gulf region. To fill the gap left by 20 million barrels passing through the Strait of Hormuz daily would exhaust the 400 million barrels in 20 days. On the day the strategic reserve release was announced, Brent crude rose 4 percent and traded in the low $91 per-barrel range. Francesco Pesole, a strategist at ING, called the reserve release 'a water gun, not a bazooka'.

During the 1973 embargo, crude oil that vanished from the market represented about 7 percent of global supply. The amount that disappeared from the 2026 Strait of Hormuz closure was about 20 percent. By magnitude alone, three times as much. Saudi Arabia, Kuwait, and the UAE possessed spare production capacity of about 4 million barrels daily, but with the strait sealed, they had no way to send that oil to sea. The combined capacity of pipeline bypass routes (Saudi Arabia's East-West Pipeline, the UAE's Abu Dhabi-Fujairah Pipeline, and others) totaled only 3.5 to 5.5 million barrels daily. The net shortfall was 14.5 to 16.5 million barrels per day, a gap beyond what strategic reserves could cover.

This is the third generation model of energy weaponization. It is neither refusing to supply resources nor shutting down pipelines. It is using geography itself as a weapon. And by demanding the Chinese yuan rather than the dollar as payment for passage through that geography, it cracks open the petrodollar system that has held for half a century.

25.4 Common Patterns and Critical Distinctions in Weaponized Energy

When the three instances of energy weaponization are laid side by side, recurring patterns emerge. Simultaneously, a trajectory of evolution across eras becomes visible.

Common pattern one: targeting structural vulnerabilities.

The Arab nations in 1973 targeted post-war capitalism's 'cheap oil addiction'. Though the U.S. depended on oil imports for only 19 percent of its needs, a 7 percent supply reduction triggered a four-fold price surge. Psychological fear moved faster than physical scarcity. Russia in 2022 targeted Germany's 'pipeline dependence'. Germany had entrusted more than half its gas consumption to Russia and closed off alternative options like nuclear and coal power on its own. Iran in 2026 targeted the fact that the global economy hung on a single 21-mile-wide strait, and that the safety of that strait depended on the judgment of London's insurance market.

In all three cases, the target of weaponization was not an adversary's military power but a single point of failure in the global supply chain. This structure offsets military inferiority with energy as an asymmetric weapon.

Common pattern two: harm extends beyond the intended target.

The target of the 1973 embargo was the United States and the Netherlands. Yet a four-fold oil price surge hammered the global economy, including France, Italy, and Japan. The target of the 2022 gas cutoff was Europe's will to support Ukraine. But as Europe hoarded LNG, Pakistan and Bangladesh plunged into blackouts. The target of the 2026 Strait of Hormuz closure was U.S. military operations. Yet the Philippines, which depends 98 percent of its oil imports on the Middle East, and South Korea and Japan, which depend on more than 80 percent, took direct hits. Energy weapons cannot be precision-guided. Aim at one place, and the entire global economy trembles.

Common pattern three: weaponization generates defense systems.

The 1973 shock gave birth to the IEA and the strategic petroleum reserve system. Oil exploration in non-OPEC regions (Alaska, the North Sea) exploded, and nuclear power plant construction boomed. The 2022 shock accelerated Europe's energy supply diversification. Floating LNG terminals were hastily built, renewable energy investment surged, and dependence on Russian gas plummeted from the 40-percent range to 15 percent in just two years. What defense system the 2026 shock will generate remains ongoing.

Now we turn to the critical distinctions.

First, the mechanism of weaponization has evolved.

1973 was production control, a one-dimensional method of cutting supply by closing valves. When OAPEC ministers gathered in a conference room and decided to 'reduce by 5 percent each month', execution followed immediately. 2022 was infrastructure control, a way of regulating the flow through a physical structure called a pipeline. It tightened gradually under technical pretexts, and imposed political conditions to force the other side's hand.

2026 was systems manipulation. Iran lacked the naval force necessary to physically seal the strait completely. After the U.S. Navy disabled 17 Iranian warships, not a single Iranian vessel remained on the Persian Gulf. Yet the strait closed. Iran achieved the blockade by manipulating a global mechanism called the 'insurance system', not military force. With a few drones pushing insurance premiums to unbearable levels, the market closed the strait on its own. From production control, through infrastructure control, to systems manipulation. The sophistication of weaponization rose one step at a time.

Second, the scale of the target changed.

Oil that vanished from the market in 1973 represented about 7 percent of global supply. In 2022, most of the roughly 40 percent of Europe's pre-war Russian pipeline gas that disappeared from Europe held only a limited share of total global energy supply. What the 2026 Strait of Hormuz closure cut off was about 20 percent of worldwide oil supply. Fatih Birol, IEA Executive Director, said 'global energy supply dropped by about 20 percent'. Nearly triple that of 1973. It was not oil alone but a compound energy cutoff binding together Qatar's LNG (one of the world's largest LNG exporters), Middle Eastern fertilizer feedstock, naphtha, and helium all at once.

Third, and the most significant distinction: a direct challenge to dollar hegemony.

The 1973 oil embargo paradoxically gave birth to the petrodollar system. The United States seized the opportunity created by crisis. Saudi Arabia's practice of selling oil only for dollars and investing surplus dollars in U.S. Treasury securities solidified. The 2022 gas weaponization did not directly challenge the dollar system. Russia demanded ruble payment, but this was closer to a currency defense measure for Russia than a shake to the international energy settlement system.

2026 is different. Iran seized the physical space of the Strait of Hormuz and collected passage fees in Chinese yuan. Chinese tankers paid in yuan, passed through the strait, and carried Iranian crude. Even before the war, Iran's 'shadow fleet' had exported oil to China via yuan settlement to evade U.S. sanctions. War transformed this flow into a torrent. A maritime economic zone beyond the reach of the dollar had physically emerged over the Strait of Hormuz.

If the 1973 crisis created the petrodollar, the 2026 crisis made the cracks in the petrodollar visible.

Looking at the entire genealogy of energy weaponization, this trajectory emerges. From resource nationalism (1973) through infrastructure hostage-taking (2022), to a compound weapons system combining geography, insurance systems, and alternative payment networks (2026). The instruments of weaponization have grown more sophisticated, the scope of harm has widened, and the cost of response has grown exponentially.

One thing remained unchanged. When energy flows stop, the rules of world order are rewritten regardless of military power's magnitude. In March 2026, U.S. Navy carrier strike groups were afloat in the Persian Gulf. Iran's navy was in ruins. Yet the Strait of Hormuz remained closed, allied tankers could not pass through a single vessel, and across the United States, the 'No Kings' protests against gas prices approaching seven dollars a gallon engulfed 50 states. The world's mightiest military force stood halted before a 21-mile-wide strait. This is the scene reached by half a century of energy weaponization's evolution.

Attorney Kim Kyung-jin, AI expert

AI legal policy specialist, former National Assembly member, author of numerous works

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