Fri, Mar 13, 2026 page8

• Iran war causes energy rethink

  • By Harun Talha Ayanoglu
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  The Iran war has exposed a fundamental vulnerability in the global energy system. The escalating confrontation between Iran, Israel and the US has begun to shake international energy markets, largely because Iran is disrupting shipping through the Strait of Hormuz. This narrow waterway carries roughly one-third of the world’s seaborne oil, making it one of the most strategically sensitive energy corridors in the world. Even the possibility of disruption has triggered sharp volatility in global oil prices. The duration and scope of the conflict remain uncertain, with senior US officials offering contradictory signals about how long military operations might continue. In such circumstances, markets react quickly to uncertainty.

  For Taiwan, the implications are particularly serious. The Strait of Hormuz forms a critical link in the nation’s energy supply chain. Official statistics show that approximately 61 percent of Taiwan’s imported crude oil originates from Gulf States, including Saudi Arabia, Kuwait, the United Arab Emirates, Iraq and Qatar. Nearly one-third of its liquefied natural gas imports also come from Qatar. Any disruption, like a blockade, increased insurance costs for shipping or the rerouting of tankers, would quickly lead to higher energy costs for Taiwan’s economy.

  Oil markets have already responded with volatility; the Taiwanese government has activated a dual price-smoothing mechanism to limit increases in gasoline and diesel prices, while state-owned CPC Corp, Taiwan absorbs part of the surge in global fuel costs. Authorities have also temporarily reduced fuel commodity taxes, and introduced targeted subsidies for sectors such as agriculture and fisheries to cushion the impact of rising energy prices. While such measures can stabilize prices in the short term, they shift part of the burden to public finances.

  At the same time, the security situation in the strait is becoming increasingly complex. Iran has begun deploying naval mines in the area and has threatened to target oil tankers and cargo ships transiting the strait without its approval. Mines pose long-term dangers as they are difficult to detect and can remain active for decades; in 2024, the Turkish navy neutralized a drifting sea mine near the Dardanelles Strait believed to be a remnant of minefields laid during World War I in 1915. This incident alone illustrates how maritime mines can continue threatening shipping long after conflicts end.

  Beyond mines, Iran has several more asymmetric tools to disrupt maritime traffic in the Strait of Hormuz. Iran has been using uncrewed surface vessels even before the war. These systems demonstrated their effectiveness in the Ukraine war by eliminating roughly 40 percent of Russia’s Black Sea Fleet. They are difficult to detect due to low radar signatures and small surface profiles, particularly at night. In addition, portable missile systems such as the Man-Portable Air-Defense System requires minimal preparation compared with ballistic missile launches and can be operated by even an individual. Combined with naval mines and small fast boats, such tools offer cheap and flexible ways to threaten shipping lanes.

  For Taiwan, these developments highlight deeper structural issues in energy policy. Taiwan’s energy transition strategy aimed to phase out nuclear power while expanding renewable energy to supply 20 percent of electricity generation. While the nuclear phaseout has been completed, renewable energy accounts for about 12 percent of generation, below the initial target.

  This challenge is not unique to Taiwan. European Commission President Ursula von der Leyen described Europe’s reduction of nuclear power as a “strategic mistake,” noting that dependence on imported fossil fuels has exposed the region to geopolitical risks and price volatility. Even Japan has begun restarting nuclear reactors after sharply reducing nuclear generation following the Fukushima Dai-ichi nuclear power plant disaster.

  Renewable energy remains essential for long-term decarbonization, but current technologies cannot yet provide the same level of stable baseload power that nuclear plants once supplied. Without sufficient storage capacity or complementary energy sources, systems relying heavily on intermittent renewables might continue to depend on imported fossil fuels. For Taiwan, this issue is particularly significant because energy underpins the functioning of the entire economy, including the advanced manufacturing and semiconductor sectors that anchor global technology supply chains.

  In this context, Taiwan’s energy policy requires careful reassessment. The question is not whether renewable energy should expand, but whether the overall system is resilient enough to withstand geopolitical shocks such as those now unfolding around the Strait of Hormuz. Diversifying supply sources, bolstering long-term fuel contracts, improving grid flexibility and reconsideration of the nuclear option could all help reduce Taiwan’s exposure to external disruptions as global energy markets grow increasingly uncertain.

  Harun Talha Ayanoglu is a visiting research fellow at the Institute for National Defense and Security Research.
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