Energy Advisory
The Hormuz Disruption and What It Means for NYC Building Energy Costs
Ten days into the Iran conflict, Brent crude has broken $100 for the first time since 2022, Qatar and Bahrain have declared force majeure on energy shipments, and Iran is attacking GCC water and oil infrastructure. This document explains how those moves transmit to NYC utility bills and what building managers need to do before April statements arrive.
NYC electricity and gas costs are now moving — April and May bills will be materially higher
NYC buildings in Con Edison's service territory will see meaningfully higher electricity and gas costs in April and May. The cause is a disruption of unprecedented speed and scale in global energy supply. What follows is what has already happened — confirmed, in the market — and what it means for your utility bills.
On February 28, joint US-Israeli strikes began Operation Epic Fury. Within 24 hours, the IRGC declared the Strait of Hormuz closed to commercial shipping and began attacking tankers in the Gulf. The strait handles roughly 20 percent of the world's daily oil and gas supply. For the first time in history, that corridor became commercially unusable — not through a formal legal declaration but through active vessel attacks and the complete withdrawal of war-risk insurance by Lloyd's of London and the P&I clubs. Tanker traffic fell from approximately 24 vessels per day to near zero within 72 hours. Around 300 tankers remain stranded inside the Gulf with nowhere to go.
Over the weekend and into Monday morning, the situation escalated materially. Israel struck Iranian oil storage facilities in Tehran for the first time. Iran expanded its attacks on GCC energy infrastructure — Bahrain's only refinery was set ablaze, Saudi Arabia's Shaybah oil field was targeted by drones, and an oil facility in Fujairah, UAE was struck. Qatar, Kuwait, and Bahrain have all now declared force majeure on energy shipments. The market opened Monday morning with the following conditions:
Intraday high $114–119 Reuters
per MMBtu — up from ~$2.80 pre-conflict
blended rate / kWh (vs. $0.27–0.30 today)
force majeure today
These moves are beginning to reach NYC utility bills. The bills that fully reflect current conditions will arrive in April and May — the window for preparation is narrowing but has not closed. The G7 and IEA are holding an emergency call this morning to discuss a coordinated release of 300–400 million barrels from strategic petroleum reserves, which pulled prices off their intraday highs but left them still approximately 14–19% higher on the day. Analyst commentary is consistent: the reserve release is a psychological buffer, not a structural fix. The physical security condition — no tanker movement, no insurance coverage — remains unchanged.
The bull case still exists but has materially narrowed since last week. Goldman Sachs had modeled a de-escalation retracement toward $70/barrel if Hormuz flows normalized. That retracement path remains mathematically possible, but it requires clearing a higher bar: Hormuz reopening is no longer sufficient on its own, because Qatar's energy minister has stated that Ras Laffan will not restart until the conflict ends completely, and even after it ends, restart will take four to eight additional weeks. A building on a variable-rate electricity contract that sees elevated April bills should not expect May to normalize quickly even in a ceasefire scenario — the LNG supply disruption has its own recovery timeline that lags the geopolitical one.
Soft closure — but GCC infrastructure attacks change the duration calculus: Hormuz remains a soft closure — commercially unusable through insurance withdrawal and vessel attacks, not a physical naval blockade. That can in principle reverse faster than a physical closure. However, this morning's developments — Bahrain's refinery struck and destroyed, Shaybah oil field targeted, UAE oil facility hit — represent a shift from logistics disruption to production capacity damage. Production infrastructure takes weeks to months to repair regardless of when hostilities end. The recovery timeline for energy supply in a ceasefire scenario is now longer than it was on Day 1.
How a closed strait becomes a higher utility bill in New York
Qatar's Ras Laffan terminal — the world's largest LNG export facility — halted production on Day 3 following drone strikes. Hormuz is the exit route for roughly 20 percent of the world's daily oil and gas supply. With the strait commercially closed, Europe and China simultaneously lost their contracted Qatari supply and began bidding for replacement LNG from US Gulf Coast export terminals. That competition is what moves Henry Hub — the US domestic gas benchmark. Henry Hub then sets the marginal cost of electricity in New York through NYISO Zone J's gas-peaker pricing mechanism. The disruption does not stay in the Gulf. It travels directly to your utility bill. Yemen's Houthi forces — who had paused attacks following the Gaza ceasefire in October 2025 — threatened to resume Red Sea operations on the conflict's opening day. No confirmed strikes had materialized as of early March, but major carriers including Maersk immediately rerouted services around Cape of Good Hope in anticipation. The practical effect is the same as active attacks: both primary maritime routes connecting Gulf energy to global markets are now closed to normal commercial traffic.
The dominant near-term exposure for most buildings.
NYC commercial buildings in Con Edison Zone J (Manhattan, parts of the Bronx) and Zone I (Brooklyn, Queens, Staten Island) are currently paying roughly $0.27–0.30/kWh all-in blended — well above statewide averages that include cheaper upstate zones. That bill divides into a regulated delivery component (~$0.14–0.16/kWh, fixed, does not move with gas markets) and a supply component (~$0.12–0.14/kWh) that tracks NYISO Zone J day-ahead prices, set by gas peakers at the margin.
When Henry Hub rises, it is the supply component that moves. At the $4.50–5.50/MMBtu range analysts now describe as the current market trajectory, the supply component roughly doubles, pushing the all-in blended rate toward $0.36–0.40/kWh. If disruption extends and Henry Hub reaches $6–8+, that moves toward $0.42–0.48/kWh — with summer peak hours potentially hitting $0.55–0.70/kWh on the worst days. On a building consuming 1.5 million kWh annually, that is a $120–270K annual variance against today's baseline. Buildings on variable-rate or Con Ed default supply are exposed to every price spike in real time; buildings on fixed ESCO contracts are protected until renewal.
NYC buildings pay Henry Hub plus a local pipeline premium — and both are moving.
Buildings taking gas supply from Con Ed or an ESCO don't pay Henry Hub directly — they pay Henry Hub plus the Algonquin Citygate basis differential, the pipeline spread into New York City. In normal conditions that differential runs $1–3/MMBtu above Henry Hub; under sustained demand pressure it can spike to $5–10/MMBtu independently of what Henry Hub is doing nationally. At the $4.50–5.50/MMBtu trajectory analysts now describe as the current baseline, an NYC building's all-in delivered gas cost moves toward $6.50–8.50/MMBtu before Con Ed distribution charges. A mid-size residential building consuming 40,000–60,000 MMBtu annually faces an additional $60–150K in annual cost against pre-conflict levels — more if the basis differential widens.
Buildings with fixed-price gas supply contracts are insulated until renewal — but the forward curve at renewal will look materially different than when those contracts were signed. If your gas supply contract expires anywhere in 2026, that date is the most important number in your energy file right now.
No action required now — but set a July procurement review date today.
Heating season ends mid-April. Current-year exposure is modest. The real decision is fall procurement — typically 60,000–80,000 gallons for an NYC commercial building, now facing delivered prices tracking toward $5.00+/gallon against a pre-conflict baseline of ~$4.40–4.55. At those volumes, each $1.00/gallon change carries a $60,000–80,000 budget impact. The right action today is deliberate inaction: do not lock in at currently elevated prices, and do not let the decision drift into an oversight. Set a calendar date in early July to revisit procurement with the benefit of three additional months of market clarity.
The most lagged exposure — but not immune.
Con Ed's Gas Adjustment Charge, which passes through the utility's actual gas purchasing costs, resets monthly or quarterly. Steam-heated buildings will feel Henry Hub movements within one to two billing cycles. The lag works in both directions: if gas prices ease, steam cost reductions also trail by one to two cycles.
Buildings with absorption chillers face a compounding summer exposure: higher steam costs and higher electricity costs arriving simultaneously during the highest-demand months. This is the building type with the most concentrated cooling-season risk.
Three Hormuz scenarios — sourced to institutional analysis
GES does not forecast geopolitical outcomes. The scenario structure below is drawn from published analysis by Goldman Sachs, JPMorgan, Barclays, Bank of America, and Citi, as of their most recent available notes. We have translated their oil and gas price ranges into NYC building cost implications using our knowledge of Con Edison rate structures and local market conditions.
The variable that drives energy prices is Hormuz traffic restoration, not conflict duration per se. The war could continue while Hormuz reopens; it could end while mines in the water keep traffic constrained. Goldman Sachs described the relationship between disruption length and price as a convex function: brief disruptions produce disproportionately smaller price impacts because oil can be stored temporarily in the region. But if Gulf storage fills and production is forced to cut, the market can rebalance only through demand destruction — which historically requires triple-digit oil prices. That nonlinearity is why the difference between three weeks and five weeks of disruption is not proportional.
Flows restore
within ~3 weeks
Henry Hub: $3.50–4.00+$60–90K variance Citi · GS
Flows constrained
through April–May
NOW ARRIVED
Henry Hub: $4.50–5.50+$120–180K variance GS · JPM · Barc
Extended disruption +
GCC infrastructure
damage
INDICATORS NOW ACTIVE
Henry Hub: $6.00–10.00+$250K+ variance JPM · BofA · GS
As of Monday morning March 9, Scenario B has arrived — Brent has broken $100 and remains there. Scenario C trigger conditions are actively materializing: GCC energy infrastructure is being struck across multiple countries simultaneously, force majeure declarations are cascading, and the new Iranian supreme leader has been confirmed as a hardliner with no stated interest in negotiation. The appropriate planning posture has shifted: assume Scenario B as the current baseline, monitor for movement toward either Scenario A de-escalation or Scenario C production capacity damage.
On the G7/IEA reserve release — and what it does and doesn't do: G7 finance ministers are meeting this morning with IEA director Fatih Birol to discuss a coordinated release of 300–400 million barrels from strategic reserves — the largest such action ever proposed, representing 25–30% of total IEA member reserves. News of the discussions pulled Brent from intraday highs of $114–119 down to approximately $108. Analysts note that SPR releases historically provide a $10–20 buffer to prices and serve primarily as a psychological signal of government coordination. They address crude oil supply, not the physical security condition that keeps tankers from moving, and not the LNG supply gap from Qatar's shutdown. The reserve release does not restore Hormuz traffic — it buys time. Buildings should not plan for a return to pre-conflict energy prices on the basis of this intervention alone.
A framework for calculating your own exposure
The scenario ranges above are built around a 150–200 unit building consuming approximately 1.5 million kWh annually. Your building's actual exposure depends on four variables specific to your situation. The difference between a well-positioned building and a poorly-positioned one in Scenario B can exceed $100,000 — and that difference comes from contract structure, not from anything in the geopolitical situation.
Variable rate or Con Ed default supply: Fully exposed to NYISO Zone J spot prices. April and May bills will directly reflect current market conditions. The supply rate differential under Scenario B is approximately $0.08–0.12/kWh above today's baseline — multiply by your annual kWh to estimate annual exposure.
Scenario B rate increase: ~$0.08–0.12/kWh
Scenario C rate increase: ~$0.14–0.18/kWh
Multiply by your annual kWh to get your exposure range. Typical 150-unit all-electric building: 1.0–1.5M kWh/yr. Larger buildings with central HVAC and amenities: 1.5–2.5M kWh/yr. If you don't know your annual consumption, it is on every Con Ed bill.
Oil heat: Current-year impact is modest — heating season is ending. The real decision is Aug–Sep procurement for next winter. Each $1.00/gallon change in delivered price × your seasonal volume = your budget impact.
Con Ed steam: Exposed via Gas Adjustment Charge with a 1–2 cycle lag. Absorption chiller buildings face compounding summer exposure.
If yes: monitor, plan, and brief the board with current market context.
If no: the board needs to know now. Brent above $100, force majeure cascading across the Gulf, and a hardliner successor installed in Tehran all point toward this situation persisting for weeks. A proactive board conversation in March is far less disruptive than an emergency special assessment in May.
What to do now — and what to watch to know which scenario is unfolding
The actions below are information-gathering steps that take days, not weeks, and that have positive expected value across all three scenarios. None of them require committing to a view on how the conflict resolves.
- Pull every energy supply contract and find all renewal dates. Fixed contracts for electricity and gas are providing real protection right now — but only until expiry. Any contract renewing in Q2 or Q3 2026 will face a materially different forward curve than when it was signed. You need these dates before your broker or supplier calls you, not after.
- Confirm whether you are on variable or fixed electricity supply. If you are on a variable rate or Con Ed default service, your April and May bills will be the first direct signal of your actual exposure. Some buildings are on variable rates without realizing it if a fixed contract lapsed without a formal renewal. Check now.
- For oil-burning buildings: consciously defer the procurement decision to summer, with a defined review date. Current-year consumption is modest as heating season ends. The right answer is to monitor the Hormuz situation through Q2 and revisit procurement in July. Set a calendar date for that review so it is an active decision, not an oversight.
- Have the reserve conversation with the board before bills arrive. Frame it as a range: here is our current reserve level, here is the scenario range of potential energy variance, here is the threshold at which we would need a special assessment. Boards that receive this information in March — with context, and time to plan — are in a materially better position than boards that receive a surprise in June.
The leading indicators that tell you which scenario is unfolding
The conflict's duration is unknowable, but its trajectory is observable. These are the specific data points that signal which scenario is materializing in real time:
"None of the right actions this week require certainty about how the conflict ends. They require knowing your contract status, your consumption, and your reserve position — information that is useful regardless of which scenario unfolds."