Can the world survive without Gulf oil?

Every major conflict in the Gulf revives the same fear – not simply of higher oil prices, but of whether the region that supplies around one-third of the world's seaborne crude can continue to underpin the global economy.

This time, however, the question runs deeper. If war prolongs and continues to damage production facilities, export terminals or vital shipping lanes, is the age of Middle Eastern oil nearing its end? Is the world prepared to move beyond oil, gas and the Middle East altogether and survive?

The modern economy was built on abundant and affordable fossil fuel. Coal powered the Industrial Revolution, but oil overtook it after the Second World War as Gulf producers rapidly expanded output. Natural gas followed, becoming an essential fuel for power generation, industry and households. Together, oil and gas still account for more than half of global energy consumption despite the rapid growth of renewables.

Is oil really declining?

Although the 21st century is expected to belong to renewable energy, fossil fuels are likely to dominate the global energy mix for decades. Oil and gas will remain indispensable for transport, heavy industry, petrochemicals and heating even as electricity becomes cleaner.

Renewables are booming. But electricity is only a part of the energy demand. Aviation still depends on jet fuel. Shipping still runs largely on oil. Petrochemicals need crude. Heavy machinery and defence depend on petroleum.

Oil's share is shrinking gradually, but its strategic importance remains enormous. The transition is underway, not complete.

The Gulf's real advantage has never been just oil – it has been abundant, low-cost oil.

Can the world replace Gulf supplies?

The Gulf countries supply over a fifth of global crude oil production and about 10% of worldwide natural gas production. The region holds roughly 33% of proven global oil reserves and 21% of natural gas reserves.

A major portion of Gulf oil and liquefied natural gas passes through the Strait of Hormuz, making global supply heavily dependent on maritime stability in the region. With war now spreading to the Red Sea, another major sea trade corridor now comes under fresh threat as Yemen-based Houthis target Saudi ships on Bab el-Mandeb. Oil and goods leaving the Persian Gulf through Hormuz must travel past the Arabian Peninsula and typically pass through Bab el-Mandeb to reach the Red Sea and the Suez Canal.

When both channels become unsafe, around one-fifth of global oil supplies and one-tenth of natural gas supplies are effectively cut off from the market.

Some potential alternative suppliers are the United States, Canada, Brazil, Guyana, and Norway. Some have already boosted output and exports, but physical constraints remain as they cannot build production, storage and export infrastructure overnight to further scale up supplies.

These producers may benefit in the short term from supply gaps, but they are far from being able to replace the massive supply deficit from the Persian Gulf immediately. Russia and Venezuela could have been better alternatives had sanctions not constrained their production and exports.

If prolonged war and persistent sanctions push oil prices to $120-$150 a barrel for months or years, the world will face higher inflation, costlier shipping, and rising prices of food, fertilisers and raw materials, leading to slower trade. For smaller economies like Bangladesh, the impact would be far worse; government subsidies would rise, and debt stress would deepen.

Scarce and expensive oil and gas will accelerate the transition to electric vehicles, renewable energy, and emerging alternatives such as hydrogen. But any such transition takes decades.

In the meantime, energy scarcity and high prices could instead reverse the global push for clean energy. Coal is already making a comeback as countries rely on it to generate more electricity. Governments often return to fossil fuels during crises, even while investing in clean energy for the long term. The electricity-hungry AI industry is also prompting the US to invest more in nuclear energy.

What it means for Bangladesh

The world is unlikely to move beyond oil and gas anytime soon, and moving beyond the Middle East as its cheapest and most reliable supplier is even less realistic. Any prolonged disruption in the Strait of Hormuz, Bab el-Mandeb, or the Suez Canal can amplify price shocks and ripple far beyond the region, pushing up inflation, slowing trade and delaying economic recovery across both developed and developing economies.

There are encouraging signs that diplomacy may yet prevail. Despite exchanging threats, the US and Iran have both indicated a willingness to resume talks. If this progresses, Hormuz may reopen. Saudi Arabia, though forming a global group to strengthen maritime security in the Red Sea amid Houthi attacks, has urged the Trump administration for restraint.

While oil multinationals are enjoying a windfall from war-induced price hikes – making an estimated $93 billion in the three months since the war began in February this year – Middle Eastern countries have suffered substantial damage to at least 80 oil and gas facilities, with some requiring up to two years to resume operations, according to International Energy Agency estimates.

The world will continue to need oil and gas. The Middle East also needs to protect its oil resources, which remain the backbone of the region's economies despite ongoing diversification efforts.

The longer a Gulf war lasts, the greater the risk for both the Middle East and energy-importing countries.

For Bangladesh, the stakes are particularly high. Its economy has grown on the back of affordable imported energy and export-oriented trade, both of which depend heavily on the Gulf and the shipping routes through Hormuz, Bab el-Mandeb, and the Suez Canal. Any prolonged disruption would arrive as higher import bills, persistent inflation, and slower economic growth. If the Gulf's oil economy weakens, Bangladesh risks losing its largest manpower market.

Bangladesh has little influence over the course of a distant conflict. What it can do is pursue a balanced foreign policy relating to the Gulf region, diversify energy sources where possible and avoid strategic choices that could jeopardise either its fuel supplies or access to key maritime trade routes.