Geography is inescapable. Although globalization and open markets have turned the world into a 'village', facilitating trade and access to all markets according to economic needs—thereby diminishing geography's fundamental role—geopolitics is now regaining its dominance over trade routes and exchanges between nations.

Fatih Birol, Executive Director of the International Energy Agency, analyzes in a strategic article how geopolitical tensions are redrawing the map of global energy markets after confidence in the Strait of Hormuz was shaken, along with the shock of Russia's invasion of Ukraine and the European Union's commitment to fully phase out Russian gas imports by the end of this decade. According to his article, trust in waterways has become a key pillar for the energy sector (Foreign Policy).

Whether the conflict between the United States and Iran escalates again or ends permanently, it will not stop the major changes the energy sector is witnessing following two major shocks to international supplies, according to Birol, who wrote: 'In my conversations with government leaders and corporate heads, the prevailing view was that there is no return to the situation before the war broke out on February 28. Whatever the outcome of the conflict and peace negotiations, the world has now seen that the strait can be closed overnight. Confidence in this waterway as a safe trade route has evaporated.'

Birol points out that the two major shocks in 2022 and 2026 have cast doubt on the fundamental assumption of global interconnectedness on which the international energy system was built. He says: 'Many of us believed that energy trade was primarily driven by economic necessities. But today, trade in energy and other goods has become a geopolitical tool, representing a potential strategic advantage for some and a potential strategic weakness for others.'

While the link between the energy sector and geopolitics is not new, what is new is that we are now witnessing a global energy system increasingly shaped by geopolitical forces, rather than the commercial and economic considerations that have dominated the industry in recent decades.

This shift will have long-term repercussions, according to Birol, explaining that it requires investment decisions and partnerships based on a long-term strategic vision. The world may see a strengthening of some trends that have already begun; he cites examples such as the shift among energy importers toward local energy sources that reduce the need for fuel imports, in addition to the already ongoing use of alternative routes and the search for additional ways to reach markets for energy and other goods that avoid the Strait of Hormuz. Gulf oil producers are also exploring other solutions to reduce dependence on the strait, such as building oil stockpiles directly in importing countries.

Even outside the Middle East, producers are seeking to expand their reach to other markets. For example, renewed efforts to develop oil and liquefied natural gas infrastructure in Canada to transport resources to Asia and Europe.

Geographical references

This trend is not limited to oil and gas; last year, China demonstrated its ability to use its dominant position in supplying rare earth elements—essential for key energy technologies and other strategic industries—to pressure certain economies.

There are protective measures that make the energy system more secure but also more costly, as Birol suggests. The most important are: creating alternative routes to access markets, strengthening supply chains, reducing utilization rates of backup infrastructure, and investing in strategic reserves.

Birol concludes his article by stating that the global energy map is currently undergoing a 'reshaping. The degree of mutual trust will determine the features of this map. And it is clear that we are all starting to pay the price of living in a world lacking trust.'