Ireland and EU Must Prepare for Strait of Hormuz Closure in 2026
Ireland and the EU should prepare for the Strait of Hormuz to remain closed for much of 2026, potentially reducing global oil supplies by 15%. This could cause oil prices to surge to $170-$460 a barrel, triggering a global recession and significantly impacting Ireland's economy with increased import costs and consumer prices.
Financial markets anticipate a swift end to the Iran war, with oil prices rising only 50% so far. However, concerns exist that the Strait of Hormuz could remain closed for much of 2026, leading to a 15% reduction in global oil supplies.
Experts from The Economist suggest oil prices would need to rise between $170 and $460 a barrel—a 150% to 500% increase—to balance supply and demand. This could push the world economy into recession, similar to the 2020 COVID-19 impact where a 3% GDP fall led to a 7% drop in oil consumption. The International Energy Agency head, Fatih Birol, warned of the worst energy crisis since World War II.
For Ireland, a prolonged closure could increase energy import costs by at least €10 billion, over 3% of national income, and cause consumer prices to rise by 5% or more. This would be compounded by a global recession, potentially lowering Irish national income and consumption by at least 3% and increasing the welfare bill due to higher unemployment and inflation.
The Irish government must prepare for this potential economic shock, prioritizing national solidarity and support for vulnerable citizens. Discussions of tax cuts are a dangerous distraction; instead, focus should be on managing a severe recession and its financial implications.