Since strikes by the United States and Israel on Iran on February 28, the Strait of Hormuz—the 21-mile bottleneck linking the Persian Gulf to the open ocean—has become the centre of the largest disruption to global energy flows in decades. Normally, roughly 20 million barrels a day of seaborne oil pass through its two lanes (about one-fifth of the world’s seaborne crude), along with substantial LNG shipments. In the weeks after the attacks, that traffic collapsed to a fraction of normal levels; exports of crude and refined products out of the Gulf fell to under 10% of pre-conflict volumes.
Markets reacted violently. Brent, trading near $72 a barrel before the strikes, jumped past $100 within days and briefly hit $126—the highest since 2008—before plunging and rebounding as diplomatic signals and military developments unfolded. With the strait effectively contested, volatility itself has become a primary risk: every strike, policy move, or even a leader’s social-media post can swing prices and insurance decisions.
Iran did not initially mount a classical blockade. Instead it used asymmetric tactics—drone and missile strikes, harassment of vessels, fast-boat interdictions—that created a practical shutdown without a formal naval cordon. A few attacks unnerved insurers and ship operators; cover was withdrawn, crews refused transits, and many ships were diverted to Iranian ports. The result: thousands of vessels are effectively bottled up in the Gulf—around 3,200 at last count.
Yet Tehran has continued to move oil, notably to China, including shipments that transit the strait with vessel tracking turned off. The US, even while striking Iranian targets, temporarily eased some sanctions to calm markets. Iran also reopened its Jask terminal on the Gulf of Oman, sending a clear message: the strait is functionally closed to most traffic, but Tehran still finds ways to sell to trusted buyers.
The immediate price spike matters, but the structural fallout may be longer lasting. Gulf producers are running into storage limits and face the painful decision to cut output. Shutting wells to balance supply is expensive and risks reservoir damage; the longer production is curtailed, the longer recovery will take once flows resume. Refining is another choke point: roughly 3 million barrels per day of Gulf refining capacity has been taken offline, partly from direct damage and partly because refineries lack feedstock or markets. Repair timelines can be measured in years—QatarEnergy warned that an attack on LNG infrastructure might take three to five years to fix—leaving a long tail of disruption.
Global liquefied natural gas markets were already strained after Russia’s invasion of Ukraine. With available supply down and demand up—particularly in Asia and Europe—buyers are bidding fiercely for remaining cargoes. The effects are visible on the ground: South Korea imposed a fuel-price cap after gasoline spiked above 1,900 won per litre; Indian consumers panic-bought cooking gas cylinders, prompting government seizures of hoarded stock and driving a huge surge in sales of induction stoves; Australia confronts emerging shortages because of limited refining and storage capacity. The United States has not been insulated—domestic crude prices rose by more than 30% since the conflict began, and national retail gasoline averages climbed to around $3.57 per gallon.
Policymakers responded with the largest coordinated strategic petroleum reserve release in the International Energy Agency’s history: 400 million barrels, more than double the 2022 release after the Ukraine war began. The US committed 172 million barrels to be released over 120 days, joined by Japan, Germany, Austria, South Korea, Turkey, and the UK. The infusion eased markets briefly, but 400 million barrels is only about four days of global production and about 16 days of the typical volume that transits the Persian Gulf—insufficient to offset a prolonged shutdown. Alternate routes, such as Saudi Arabia’s East-West pipeline, provide partial relief but cannot fully replace tanker flows and may themselves become targets.
Observers have drawn parallels with the 1973 oil embargo, when OPEC members halted shipments to the United States and prices quadrupled, triggering stagflation and a reshaping of geopolitics. Modern models suggest even partial closures of Hormuz would have steep economic costs: a Dallas Fed simulation estimates a quarter-scale disruption could push WTI to about $98 on average and shave nearly three percentage points off annualized global GDP growth; broader disruptions would inflict deeper losses. The present crisis differs from 1973 in important ways: it stems from active warfare that can damage assets, contest shipping lanes with missiles and drones, and leave energy availability dependent on fluctuating operational, insurance, and political decisions—making the outlook far more uncertain.
Financial firms flagged even sharper risks. Goldman Sachs cautioned that if flows through Hormuz remained at only 5% of normal for ten weeks, daily Brent could top the 2008 peak of $147 per barrel. Price swings have already been influenced by tactical pauses in strikes and by public statements from leaders; Iran’s new Supreme Leader has vowed to keep blocking transit while other actors have floated pauses or limited objectives. Corporations and trading houses are treating reopening windows as short: many set internal deadlines of a couple weeks to reorganize supply chains for a potentially protracted mid-year crisis.
Two lessons stand out. First, Hormuz’s weakness was no secret—analysts, militaries, and industry have long modeled its vulnerability—yet planning and preparedness were inadequate when the risk materialised. The global energy system was built around a 21-mile choke point; when that point was contested, the effects cascaded worldwide. Second, diversification works. Countries that had invested in alternatives suffered less. China’s large build-out of wind and solar has made its grid less dependent on imports; Pakistan, burned by the 2022 price shocks, accelerated household and commercial solar deployment and now ranks among the fastest-growing solar markets. Clean-energy investments do not eliminate price spikes, but they blunt exposure to global commodity shocks.
For now, markets and governments keep watch on the strait. On the ground, places like Pune adapt—crematoriums turn to electricity or wood as LPG runs short—while the longer economic and geopolitical consequences continue to unfold. How long the disruption lasts, how much infrastructure is damaged, and whether buyers and sellers can rewire supply chains will determine whether this shock is a short-lived spike or a long-running disruption that reshapes energy markets and policy for years.”}
