Dire Straits, oil & the green transition

There is a familiar ritual every time Washington and Tehran begin circling each other more aggressively.

Politicians, pundits, and retired generals with suspiciously active media calendars slip into the same grave register, as if history itself has called them personally.

Before long, the military-industrial furnace is being fed again with the usual vocabulary of deterrence, credibility, regional stability, and freedom of navigation.

From a venture perspective, episodes like this reveal about how we’ve organised global energy trade, and where value accrues when that architecture starts to look fragile.

Nowhere is that clearer than in the dire Strait of Hormuz. Sitting between Iran and Oman, it connects the Persian Gulf to the Gulf of Oman and the Arabian Sea, and remains one of the most important energy chokepoints on earth. Roughly 20 million barrels of oil passed through it each day in 2024, equal to around a fifth of global petroleum liquids consumption. Very few viable alternatives exist if that flow is disrupted.

That is why Hormuz matters far beyond the Gulf. A narrow maritime corridor becomes a pressure point for the global economy. Shipping lanes, insurance premiums, refinery inputs, rerouting capacity, strategic reserves, tanker exposure, sovereign budgets, airline margins, fertiliser costs, and supermarket prices all begin to move with it.

No formal closure is required. Credible threat is enough. A few attacks (A Maersk-chartered container ship, Source Blessing, was reportedly struck by fragments from an unidentified projectile near Jebel Ali), a few mines, rising insurance costs, a handful of shipowners deciding they would rather not become collateral damage in someone else’s geopolitical performance, and the machinery begins to tighten.

Europe is especially exposed to that kind of pressure. When the US and Israel began bombing Iran, the effect was immediately visible in oil and gas prices. In a single day, the price of crude oil rose by 50 percent, while gas prices rose by 40 percent, DR reported.

The EU’s 27 member states imported fossil fuels worth roughly DKK 2.8 trillion in 2024. Even a 10 percent increase in oil and gas prices implies an additional DKK 280 billion in cost for households and businesses, without delivering a single extra unit of energy.

Same molecules. Higher bill. Money for nothing in the worst possible sense…maybe we should just go back to whaling again.

As a surprise to no one, oil prices matter, because Europe was already under strain before the latest Iran escalation. European industry pays far more for energy than its competitors in the US and China.

Another external shock weakens competitiveness, compresses industrial margins, and intensifies political pressure inside the continent.

The lesson of Hormuz is our exposure. Europe remains too vulnerable to imported fossil energy for comfort. We have known it for years and done too little about it.

(n.b. How terrific would it have been if we had ramped up nuclear in the 1970s instead of letting my parents’ generation virtue-signal its way through flower-power politics. In their defence, they looked rather vindicated when Chernobyl arrived the following decade. Anyway, enough generational blame for now.)

Back to the topic at hand. The conflict has consequences for policy, and for capital.

The commissioners already understand this in Brussels.

Competition commissioner Teresa Ribera said, “the shocks we are experiencing show how much we need to accelerate the energy transition.”

Energy commissioner Dan Jørgensen made the same point even more bluntly. “This crisis shows everyone how important it is for us to get rid of fossil fuels.”

Every spike in oil and gas prices is a reminder that imported fossil dependence is a liability. The less exposed Europe is to imported oil and gas, the less every Gulf crisis becomes a tax on households, industry, and growth.

It also explains why Europe’s response is framed not just as climate policy, but as economic and industrial policy. “If we are to secure this development and make ourselves independent of oil,” Jørgensen said, “then we cannot change the conditions for our green industry. We must make sure investments continue.”

Even Ulf Kristersson, hardly the caricature of a green romantic, argued that Sweden wants to “hold on to the EU’s clear climate ambitions.”

The same logic applies to investors.

When systems come under pressure, value shifts toward the companies that increases resilience. A reminder that not everything important looks glamorous.

Much of it sits in the less visible layer, in cyber resilience, maritime surveillance, supply-chain visibility, grid resilience, energy redundancy, logistics software, industrial tooling, and even in the financing layer behind hard assets (S/O Tangible).

Your takeaway from this rabble, if any, should be that a lot of durable value is built in the systems that keep things moving in the right direction.

And with that, I bid you adieu and wish you a wonderful weekend.

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P.S. Financing infrastructure for hardware is hardly glamorous, though Tangible’s website does make a respectable case for the opposite.