Re-wiring the energy fault lines: power, security and resilience

Since the near-total closure of the Strait of Hormuz from February 28th, 2026, onwards, global energy markets have suffered the largest disruption to energy flows ever recorded in absolute terms.

Oil prices have fluctuated between USD 90 – USD 110 a barrel, far exceeding pre-conflict forecasts, while localized energy crises have emerged across Southeast Asia, where several economies are heavily reliant on exports from the affected region.

For the moment, however, global stock markets remain surprisingly benign, and oil prices have not risen as much as originally feared. A larger and more diversified global energy market together with the strategic release of oil reserves has so far absorbed the worst possible effects of the crisis.

Nevertheless, “we are at a moment of profound risk,” according to Joseph Majkut, Director of the Energy Security and Climate Change Program at the Center for Strategic and International Studies. Majkut spoke on a webinar with Zurich’s Tracey Hunt, Global Head of Energy and Marine, Zurich Global Specialties and Emmanuel Mtika, Global Head of Sustainable Energy & Power Generation, Zurich Resilience Solutions, in a discussion moderated by Matt Holmes, Zurich’s Group Head of Political and Government Affairs.

Speaking with a panel of Zurich experts, he warned that as the world’s oil reserves run out, the economic reality of the closure will become increasingly felt: “We're starting to see price impacts in the United States and Europe and potential fuel shortages even in developed markets. We'll see more of that in the coming months if the Strait does not reopen.”

The political fallout

Global energy prices are deeply entwined with domestic political outcomes worldwide, and as the energy shock filters into real economies, its impact is likely to be felt by governments and polling stations.

The impact on the U.S. midterm elections in November could be profound, for example. “The most important number in U.S. politics is the price of a gallon of gasoline at a retail station,” said Majkut. “We’ve seen it increase since the start of this crisis and we’re likely to hit record national average gas prices soon.”

Today’s crisis also impacts the U.S.-China rivalry. While the U.S. is benefiting from rising fossil fuel exports as it offsets global shortages, the rising cost of energy is a tailwind for green technologies like electric vehicles and solar, where China dominates the value chains.

While the closure of the Strait of Hormuz is unlikely to offer a clear advantage to either superpower, as national governments determine their ideal energy portfolio, they must consider where they are willing to accept strategic dependencies, Majkut observed: “These are long-term structural shifts that are ongoing. I don't think we have a winner in either one yet.”

Energy transition: back to coal or accelerating renewables?

The energy crisis comes at a key juncture for global energy markets. Governments are grappling with the twin challenges of investing in grid modernization for the future while simultaneously managing rising energy demand from AI-powered technology now.

In the short-term, the crisis has triggered some countries to increase their coal consumption, while others have seen it as an opportunity to boost their renewable mix.

The long-term impact on the energy transition remains unclear and is likely to vary by region, according to Majkut. With the global economy having endured two major energy shocks in just five years – the first following the conflict between Russia and Ukraine – a “new sense of insecurity” is driving governments to double down on local energy production: “When you’re faced with security-driven crises, you diversify, endogenize and reshore.”

In Europe, this means strengthening the region’s commitment to renewables and potentially nuclear; however, regional players in South Asia are likely to increase their reliance on coal. In the long run, Majkut believes that the “green security premium” is likely to prove powerful and therefore accelerate the transition to renewables.

The AI-driven rise in energy demand over the past five years brings the future global energy mix into an even sharper focus. The International Energy Agency states that AI-related infrastructure, particularly data centers, is beginning to have a material impact on electricity consumption.

In the U.S., where much of the world’s AI investment is concentrated, data centers already account for around 5% of electricity demand – a figure expected to approach 10% by the end of the decade.

For now, AI-related electricity demand remains a relatively small part of global energy consumption and is unlikely to be directly derailed by disruption in the Strait of Hormuz. Yet a prolonged crisis, sustained oil price shock, or broader recession could still weigh on the enormous capital expenditure underpinning the sector.

Navigating a new risk environment

Many businesses are seeking to reroute supply chains, both to circumvent the immediate closure of the Strait of Hormuz and to strengthen longer-term supply chain resilience. This is a complex and costly process that gives rise to new risks, said Zurich’s Tracey Hunt.

Zurich is working closely with customers to support them in understanding their options, key exposures and potential choke points, and to tailor their insurance programs appropriately. In addition to physical risks, supply chain interruption and contingent business interruption are at the forefront of customers’ minds, she said, especially non-damage delays.

Regular dialogue is essential: “We can leverage satellite imagery and use AI tools, but nothing replaces the need to have that conversation with our customers and the ability to map that coverage and exposure together.”

The resilience imperative

Looking beyond the immediate crisis, insurers have a broader imperative to support business resilience as energy strategies evolve in response to new climate and geopolitical realities.

From upgrading infrastructure to accelerating renewable strategies, the insurance industry has an important role. “We need to bring product offerings to the market that supports that portfolio shift and ultimately help reduce and mitigate some of the volatility,” said Hunt.

“Resilience starts with a good understanding of risk,” agreed Emmanuel Mtika. As energy systems become more interconnected, resilience will increasingly differentiate the assets that remain reliable, insurable, and bankable from those that do not. Zurich is exploring a range of ways to augment its customer support, including expanding risk engineering services to help customers identify vulnerabilities across complex supply chains.

Most new and innovative energy technologies require insurance to get financial and regulatory approval, and the insurance industry recognizes its critical enabling role in the energy transition:  By helping developers, investors and lenders better understand and manage risk, we can support the confidence needed to accelerate deployment of these innovative technologies.

Outlook: a fundamental shift

Returning to the immediate crisis, the fate of the global economy appears to rest precariously on when the Strait reopens. However, regardless of the outcome, there are two assessments that can be made with certainty, the panel agreed.

First, when the Strait does open, there will be some lag, mostly likely months, before shipping returns to near normal and energy markets recover.

Second, when it does reopen, the global energy system will be profoundly and permanently altered. “The infrastructure that has guaranteed global energy security for the last 50 years is changing in front of our eyes,” observed Majkut.

Iran’s authority over maritime traffic in the region has increased, he added. “It may or may not stick but the system we have coming out of this conflict is almost certain to be different.”

Energy crises of this magnitude reverberate across regions and sectors, reshaping the global landscape from geopolitics to technology and reconfiguring the risk environment businesses must navigate. The challenge is not predicting every future twist and turn, but to recognize that a fundamental shift has already taken place.