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In this episode, Eran Efrat, an expert on the global energy market, joins the podcast for a conversation about Iran and its influence on the oil and gas markets. The discussion covers the Iranian threat to close the Strait of Hormuz, the interests of powers like China and the United States, and the possible consequences of the regime’s fall in Tehran for the global energy map.
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The threat to the Strait of Hormuz
Boris Gorelik opens with a question about Iran’s control over the Strait of Hormuz. According to Eran Efrat, about 20 percent of the world’s oil and about 33 percent of its gas pass through the strait. However, he estimates that the chance of Iran actually blocking the strait is nil. The main reason is that Iran itself depends on the passage to export its oil and gas, and it desperately needs the revenue.
Furthermore, Iran’s main customer is China, which buys about 90 percent of Iranian oil. Turkey is also an important customer for sanctioned Iranian goods. The economies of both these countries rely heavily on cheap raw materials from Iran and Russia, so they have a clear interest in keeping the passage open. Efrat adds that from a military standpoint, it would be very difficult for Iran to block the strait given the massive presence of foreign navies in the area.
A more likely scenario, he argues, is that Iran would try to disrupt traffic through intimidation, for example by firing a missile at a tanker. Such an event could cause insurance companies to stop insuring passage through the strait, thereby bringing traffic to a de facto halt, similar to what the Houthis did in the Bab el-Mandeb Strait. However, Efrat believes this is a card the Iranian regime, which is in a fragile state, will not play, because it is a suicidal move that would first and foremost harm Iran itself.
Activating proxies
In response to Boris’s question about Iran’s alternatives, Efrat explains that it can activate its terror arms in the region. For example, it could order the Houthis to renew attacks in Bab el-Mandeb, or activate Iraqi militias to attack American bases and energy facilities in neighboring countries. He mentions the past attack on Aramco facilities in Saudi Arabia.
However, he argues that the world is beginning to focus on the head of the octopus, meaning Iran itself, and not just its arms. Any aggressive move would be immediately linked to Tehran and increase pressure on the regime. According to him, the Iranian regime has invested all its resources in fortifying its proxies abroad and not in strengthening its internal resilience, making it very vulnerable at home.
Evacuation of Kharg Island
Efrat describes Kharg Island as a massive logistical center for Iran for storing and exporting oil. Recently, fearing an Israeli or American attack, the Iranians began evacuating the island. The evacuation was carried out by moving supertankers that were docked there out to the open sea. The tankers are now waiting in the water, as the cargo on them is not yet ready for shipment to customers. As a result, Kharg Island is relatively empty.
Fuel supply to Lebanon
Boris asks about the fuel situation in Lebanon, noting that Iran used to supply it with fuel but today there seem to be no supply problems. Efrat explains that Lebanon is a country that can purchase energy from any source, including European countries, Syria, Saudi Arabia, and Qatar. He is convinced that Lebanon is receiving lines of credit, likely with French support, and does not have significant energy problems.
The interest of China and Turkey
Boris raises a hypothetical scenario of the Iranian regime’s fall and the lifting of sanctions, and asks if China and Turkey would be interested in that. Efrat answers with a resounding no. According to him, both countries base a significant part of their economies on purchasing cheap raw materials from Iran and Russia. If the sanctions were lifted, they would lose this advantage and have to pay full market price, which would harm them economically. Therefore, their interest is for the current situation to continue.
Consequences of regime change in Iran
If the regime in Iran falls and sanctions are lifted, the impact on the global oil market would be small, as Iran is not a major oil producer. In contrast, Efrat explains, Iran is a gas superpower, second only to Russia in its reserves. Its entry into the global gas market as a legitimate player would completely change the map. Such a move could solve Europe’s gas crisis and put enormous pressure on Russia. However, he notes that such a move goes against the interest of the United States, which has become a major gas exporter to Europe. Efrat predicts that the Iranian regime will not survive, and that a change is expected this year.
The future of the Houthis
To the question of what would happen to the Houthis if the Iranian regime collapses, Efrat replies that they would collapse. According to him, the Houthis’ economic model is based entirely on Iranian support, which includes supplying weapons and fuel at a discounted price. They have no independent operational or economic capability. He is more concerned about Hezbollah, which is a more sophisticated organization with independent sources of income.
Finally, Efrat estimates that the price of oil is not expected to spike, and that the potential for a significant escalation in the energy market is already behind us. He notes that Israel is acting in a targeted manner against energy facilities intended for the Iranian domestic market, apparently under American pressure, and is avoiding hitting global exports.
The original episode, in Hebrew: איראן, נפט, גז