Kuwait says Hormuz closure will trigger domino effect across the world

HOUSTON — Kuwait on Tuesday said Iran’s closure of the Strait of Hormuz amounted to an economic blockade of Gulf Arab oil producers, warning that the impact was beyond catastrophic and would trigger a worldwide domino effect.

“We are outraged by this attack against us,” Kuwait Oil Company CEO Shaikh Nawaf Al-Sabah told the oil industry at S&P Global’s CERAWeek energy conference in Houston.

Al-Sabah, who made a statement via video conference from Kuwait after canceling his meeting in Houston due to the war, said, “This is not only an attack on the Gulf, but also an attack that holds the world economy hostage.”

Kuwait declared force majeure on delivery contracts and reduced oil production because it was unable to export to the global market. Al-Sabah said KPC currently produces oil only for domestic consumption.

Saudi Aramco CEO Amin Nasser warned earlier this month that a war with Iran would have “catastrophic consequences” for the world economy. Al-Sabah said Nasser underestimated the impact of the Bosphorus closure.

“It’s a domino effect,” Al-Sabah said. “The costs of this war do not stop within the geographic boundaries of this region. They extend throughout the supply chain.”

Al-Sabah said it will take months for oil production in the Gulf to reach full capacity because Kuwait and its neighbors have shut down their oil wells. Before the war, Kuwait was producing about 2.6 million barrels per day, making it OPEC’s fifth largest producer.

“We have durable reserves that can immediately unleash large amounts of production within a few days,” Al-Sabah said. “The bulk of that will come in a few weeks, and then full production will come in three or four months.”

The CEO said emergency oil releases from more than 30 countries in the International Energy Agency, including the United States, would do little to address the supply gap. He said emergency stocks of 3 million barrels per day did not cover the outages in Iraq, let alone the outages in Saudi Arabia and the United Arab Emirates.

“There is no alternative to the Bosphorus,” Al-Sabah said.

But the impact of the war extends far beyond oil and gas, the CEO said. He said petrochemicals that produce plastic for food packaging will be in short supply, making it difficult to transport food around the world.

Al-Sabah said that although the planting season has started in many parts of the world, fertilizer from the Gulf cannot reach global markets. He said some countries in the developing world could see a 50% reduction in their harvests compared to previous years.

Tanker and cargo traffic in the Bosphorus, which connects the Persian Gulf to the world, decreased due to Iran’s attacks on commercial ships. About 20% of the world’s oil supply passed through waterways before the war.

Iran has launched missile and drone attacks against Gulf Arab countries. These attacks came after the United States and Israel launched a large wave of air strikes against Iran starting on February 28.

Air raid sirens sounded multiple times in Kuwait in the early morning hours of Tuesday as Iran launched ballistic missile attacks on civilian infrastructure, Al-Sabah said.

Al-Sabah said Iran attacked refineries in Kuwait, even though they all belong to the kingdom. He said the country’s social security administration was hit in an attack earlier this month.

“All this negates Iran’s claim that it limits its attacks only to American infrastructure in the region,” Al-Sabah said.