The Energy Transition Has Its Own Strait of Hormuz

Why It Matters

The shift means energy security now depends on a narrow set of processing hubs, exposing economies to supply disruptions and geopolitical leverage similar to oil. Addressing these chokepoints is essential for reliable decarbonisation and global market stability.

Key Takeaways

• Mineral refining concentrated in few countries, creating new chokepoints.
• China projected to control majority of refined lithium, cobalt.
• US forms mineral alliances to counter Chinese dominance.
• Lack of common standards hampers clean‑energy supply chain coordination.
• Grid investment lag threatens renewable integration and energy security.

Pulse Analysis

The transition to renewable power is reshaping the geography of energy risk. While oil shipments once converged on maritime chokepoints such as the Strait of Hormuz, today the bottleneck has moved downstream to the refining and processing of critical minerals. In 2024 the top three refining nations captured 86 % of global capacity, and projections show China supplying more than 60 % of refined lithium and cobalt by 2035. Rapid demand growth—lithium up 30 % in 2024—means any disruption in these hubs can reverberate across batteries, electric vehicles and wind turbines.

Beyond physical concentration, the clean‑energy supply chain is fragmented by divergent technical standards and certification regimes. A battery may involve mining in one jurisdiction, processing in another, assembly elsewhere, and financing from a fourth, creating a complex web that requires harmonised rules to function efficiently. When standards diverge, firms face duplicated compliance costs, slowing market diffusion and giving governments a tool for economic statecraft. Simultaneously, aging transmission infrastructure and under‑investment in grids—especially outside China—limit the ability to integrate variable renewables at scale.

Policymakers are responding with industrial‑policy playbooks aimed at de‑risking these new chokepoints. The United States has launched a Forum on Resource Geostrategic Engagement, forged joint mineral action plans with Japan, and is rallying a trade bloc to dilute Chinese processing dominance. However, building alternative refining capacity demands massive private capital, long lead times, and coordinated standards. Accelerating grid upgrades, fostering cross‑border interconnectors, and aligning regulatory frameworks will be as decisive for energy security as securing oil supplies once were. The window to reshape the supply chain is narrowing, and strategic investment now will determine whether the clean‑energy transition remains resilient or replicates the vulnerabilities of the fossil‑fuel era.