What do you think when you see this image?
My first reaction is a bit of anxiety, panic, and uncertainty. I think, ‘What is the fraying rope holding up, and how long will it last?’
And here’s the thing: this is exactly how we’ve built our global energy system.
A 21-mile-wide strip of ocean called the Strait of Hormuz is at the center of the geopolitical storm brewing in the Middle East. It’s a single chokepoint through which 30% of the world’s oil flows. And when that rope frays, it’s not just oil and gas that falls. It’s supply chains, inflation, and profit margins.
But what if we didn’t need the rope at all?
It may seem far from your office in Chicago, your warehouse in Atlanta, or your HQ in Berlin, but what happens in these energy transport areas could change your margins, risk profile, and ability to meet next quarter’s numbers.
A Single Point of Global Failure
The Strait of Hormuz is the world’s most important oil and gas chokepoint:
20-30% of global seaborne oil
20% of liquefied natural gas (LNG)
$1 billion of oil shipments per day
It’s one of the key arteries of the global energy system. If it’s pinched, even slightly, ripples shoot across international markets, and that’s exactly what’s happening now.
Iran’s Parliament has signaled it may authorize the closure of the Strait. Tensions are high, and tankers are turning around. Freight rates in the region have spiked by over 150%, war risk insurance is climbing, and GPS jamming is happening. Even the threat of disruption is enough to rattle global markets.
In 52 countries, fossil fuel imports account for over half of primary energy use. In economies representing 20% of global GDP, including Germany, Japan, and Italy, imports supply over two-thirds of total energy demand. The decline of the Pax Americana, rising regional conflicts, increasingly contested maritime routes, and intensifying tariff wars have placed global trade under greater threat than at any time since World War II.
The Real Risk Isn’t Just Oil
We’ve built a global economy on the assumption that energy flows will always be cheap, abundant, and predictable. But that’s changing fast.
Here’s what happens when oil prices spike:
Transport costs jump
Manufacturing margins shrink
Input materials become unstable
Consumer prices rise
Interest rates stay high or climb further
In short, inflation spreads.
And that hits every industry: food, steel, pharma, retail, logistics, you name it.
Examples include:
Mag7 Aluminum (Missouri, U.S.): In early 2024, Magnitude 7 Metals was forced to shut its aluminum smelter, citing surging electricity prices (~$36/MWh) that made operations unsustainable, even for one of the nation's few remaining domestic producers.
CF Industries (North America): In 2021–22, CF Industries, a leading fertilizer producer, halted ammonia production at multiple plants when natural gas costs spiked. With margins razor‑thin and gas prices volatile, energy became the deciding factor between profit and shutdown.
ArcelorMittal (Germany, EU): Europe’s largest steelmaker abandoned €1.3 billion plans to convert German plants to hydrogen-based green steel due to high and unpredictable energy costs, forcing a pivot to more stable markets like France.
Generic Pharma (Europe-wide): Manufacturers such as Teva’s Sandoz and Fresenius warned they may cease production of some generic drugs, as electricity prices soared ~200% above 2021 levels, making essential medicines financially untenable
Over 1,000 hospitality businesses closed in the UK in the last quarter of 2022, directly linked to increased energy prices.
How Are Oil and Natural Gas Prices Linked?
While oil and gas have become more structurally independent over time, particularly in the U.S., their prices still tend to move together during geopolitical stress or market volatility. Here's how the link plays out:
1. Historical Linkage
Until the 2000s, gas prices were often indexed to oil, especially outside the U.S. Both were used in heating and industrial fuel, so pricing moved in tandem. In the U.S., this link weakened due to:
The shale gas boom, which created abundant, low-cost domestic gas.
Supply chain differences: oil is a global commodity; natural gas is more regional unless liquefied (LNG).
2. Crisis Correlation
In moments of uncertainty, like a Strait of Hormuz disruption, oil and gas prices frequently rise together:
Investors hedge broadly across energy commodities.
Shared demand from power generation, industry, and heating creates substitution effects.
Higher oil prices raise transportation and extraction costs across the energy sector, including gas.
3. LNG Market Effects
The global LNG market tightens the oil-gas link:
When oil prices rise, Asian and European buyers bid up LNG prices.
U.S. producers export more LNG, tightening domestic supply.
That drives up Henry Hub prices, even if the U.S. has abundant gas.
4. Price Correlation Metrics
Over the last decade, the correlation between oil and U.S. gas prices has ranged between
0.2 and 0.5 in stable times (moderate correlation)
0.7+ during global market shocks
So if oil prices spike due to Strait of Hormuz tensions, U.S. gas prices could follow suit, despite America’s domestic production edge.
A Commodity-Based System
This isn’t just about Hormuz. It’s about the fragility of a global system that runs on imported, single-use fuels.
Fossil fuels are:
Volatile
Politically exposed
Prone to inflation
Vulnerable to conflict, climate, and cartel behavior
Your operations depend on systems you don’t control, which is a vulnerable position. Previously, relying on commodities to power your operations was the only economically viable option - that’s no longer the case.
From Commodity to Technology
Here’s the alternative.
Electrotech, the clean energy strategy for energy independence, enables businesses and countries to generate and control their power.
It’s built on:
Local renewable generation (solar, wind, batteries)
Electrification of end uses (EVs, heat pumps)
The impact is staggering:
70% cut in fossil fuel from just three technologies (onsite generation/storage, EVs and heat pumps)
$1.3 trillion annual savings
20–30 years of inflation-resistant energy pricing
This isn’t theoretical. China is doing it at scale, investing in solar, batteries, and electrotech manufacturing to gain a long-term strategic advantage. We need to utilize this affordable and quality supply chain to secure our energy future while learning from them and de-risking the supply chain by building our capabilities in parallel.
What’s fascinating is that 92% of countries have enough renewable energy potential to meet their demand ten times over. The problem isn’t scarcity—it’s strategy.
The Business Case Is Real and Urgent
Whether you manage a logistics fleet, a hospital campus, or an industrial site, you can:
Cut your energy spend and hedge your prices
De-risk operations
Improve ESG performance
Build resilience against future shocks
Why Wait?
What is the most common reason businesses haven’t moved?
“We’ll wait and see what happens.”
That’s like waiting to put on your seatbelt after the crash.
Energy is no longer background noise. It’s front and center.
It affects your cost structure
It defines your operational risk
It determines your ability to grow
It’s time to:
Map your energy cost and security exposure
Build your electrification and onsite energy roadmap
Invest in systems that give you control, resilience, and profitability
Because when you own your energy system, you own your future.
This Isn’t About Fuel, It’s About Control
The Strait of Hormuz may never fully shut down. Whether it does or not, it demonstrates the energy supply chain risks we have accepted over the years and, even the threat is enough to throw energy markets into chaos.
Let that be your signal.
You no longer have to rely on wars, fossil fuels, tankers, or spot markets.
You can build locally, generating and storing energy right where you need it. Electrify intelligently. Lead the transition, do not get left behind by it, and decide whether your business can survive, let alone thrive.