Twenty Percent Through One Strait

Brent crude jumped 8% to $78.94 per barrel on March 2 after tanker traffic through the Strait of Hormuz effectively halted. Twenty percent of global oil and twenty percent of global liquefied natural gas normally transit that corridor.

The disruption followed U.S. and Israeli strikes that killed Iran’s Supreme Leader over the weekend, triggering Iranian retaliatory strikes across the Persian Gulf. There is limited spare capacity in global LNG markets heading into spring, and the closure of Hormuz removes a corridor that has no ready substitute.

Oil markets repriced immediately. The physical damage extended beyond energy infrastructure.

The data center. Unidentified objects struck an AWS data center in the United Arab Emirates, knocking out two availability zones in the ME-CENTRAL-1 region and disrupting EC2, S3, and RDS services for hours. It was the first confirmed physical damage to a major hyperscaler data center from armed conflict.

The gas pipeline. That event sits alongside a broader infrastructure question. Canary Media published an analysis in February estimating a $400 billion investment pipeline for more than 250 GW of proposed new gas-fired power plants in the United States, a figure the authors noted had nearly tripled in one year. More than 1,000 data centers are under construction nationwide. Big Tech companies borrowed and bonded more money in 11 weeks than in the previous three years combined.

Every one of those gas plants depends on continuous natural gas supply. Natural gas depends on pipelines, liquefaction terminals, tanker routes, and regasification facilities. As of this weekend, one of the most critical corridors for that supply chain is closed.

The bottleneck was already physical before it became geopolitical. Gas turbine order books were full. Lead times for new generation stretched to three to five years. Manufacturers cannot easily expand production because the engineering is complex and factory capacity takes years to build. Now the fuel itself is repricing. If Brent crosses $100, a scenario Heatmap described as plausible, the delivered cost of natural gas to U.S. power plants rises in tandem. Gas-fired generation, already competing with batteries on marginal economics, faces a widening cost disadvantage that cannot be solved with manufacturing scale or better engineering. It can only be solved with cheaper fuel. Cheaper fuel is not where the market is heading.

57.6 gigawatt-hours. The U.S. battery storage market did not wait for a geopolitical crisis to accelerate. SEIA’s first dedicated energy storage report confirmed that the country installed 57.6 GWh of battery storage in 2025 and projects 70 GWh for 2026, representing $25.2 billion in capital investment. The commercial and industrial segment grew 42% year-over-year to 2.61 GWh.

On February 27, the California Public Utilities Commission voted unanimously to order procurement of 6 GW of new zero-emitting or RPS-eligible resources between 2029 and 2032, citing data center and EV load growth. For the first time, the decision removed prior caps on how much battery storage can count toward that requirement. California already has roughly 17 GW of installed storage. The state concluded it needs considerably more, with no ceiling.

BloombergNEF reported that lithium-ion pack prices fell 8% to $108 per kilowatt-hour in 2025, with a further 3% decline expected this year. LFP chemistry accounts for more than 90% of global stationary storage deployments.

No tankers. Once a lithium iron phosphate battery is installed in a commercial building or a data center, its operating cost is determined by the local electric grid, not by events in the Strait of Hormuz. It requires no tanker transiting a chokepoint, no pipeline connecting it to a conflict zone, no regasification terminal operating at capacity to keep it running. The marginal cost of dispatching a charged battery is effectively zero, and that number does not change when oil jumps 8% overnight.

Canary Media proposed “take or pay” contracts requiring data center developers to repay full electricity infrastructure investments if their AI ventures fail, specifically to protect ratepayers from stranded gas assets. That proposal was published before the strait closed. The stranded asset risk the authors identified (disappointed AI ventures leaving hundreds of billions in gas infrastructure underutilized) now has a second failure mode: the fuel itself may not arrive on schedule.

The missing line item. Financial models for commercial battery storage quantify demand charge reduction, time-of-use arbitrage, capacity payments, and investment tax credits. None of those value streams depend on the price of oil or the navigability of a single strait. That independence from fuel supply chains has always been a structural feature of battery storage. The models have never included a line item for it.

After this weekend, the omission is harder to defend.

Sources