At Vaikunth Dham, Maharashtra’s largest crematorium, furnace operators ran out of liquefied petroleum gas (LPG). They had fuel for only a handful more services; after that bodies would be cremated with electricity or wood. It is a small, grim administrative pivot thousands of miles from combat, but it illustrates how a localized conflict around the Strait of Hormuz has sent shock waves through the global energy system.
Since US and Israeli strikes on Iran on February 28, the narrow waterway linking the Persian Gulf to the open ocean has become the centre of the worst disruption to energy markets in decades. At its narrowest the strait is about 21 miles wide. Its two shipping lanes normally carry roughly 20 million barrels of oil a day — around one‑fifth of seaborne oil trade — plus large volumes of LNG. In the weeks after those strikes, traffic through the strait collapsed: exports of crude and refined products fell to under 10% of pre‑conflict levels.
Markets reacted immediately. Brent crude, trading near $72 a barrel before the fighting, vaulted above $100 within days and reached a peak around $126, the highest since 2008. Price swings have been violent: on March 23 futures plunged more than 11% after an announcement of productive talks with Tehran, only to recover much of the loss soon after. When the world’s most important energy choke point is effectively hostage, volatility matters as much as headline prices. Every strike, diplomatic message, and insurance decision can move markets.
The paradox of this crisis is what Iran did not do. There was no formal, continuous naval blockade and no initial widespread mining of the waterway. Tehran instead produced a de facto closure through asymmetric tactics and relatively inexpensive weapons: drones and small‑boat actions. A handful of strikes on transiting ships led insurers to withdraw coverage, crews to refuse voyages through what had become a practical war zone, and many tankers to reroute or sit idle. Some vessels that tried to pass were intercepted and steered into Iranian ports. Roughly 3,200 ships remain trapped inside the Persian Gulf.
Iran later declared the strait closed to US, Israeli, and allied shipping, yet it continued to export oil. At least 11.7 million barrels have transited since the conflict began, much of it heading to China on vessels with tracking turned off. In a pragmatic twist, the US briefly eased some sanctions on Iranian oil to stabilize markets even as it conducted strikes. Iran reopened the Jask terminal on the Gulf of Oman, signaling that while passage is dangerous for most, Tehran can still move oil to key customers.
The immediate price shock was severe, but the structural damage runs deeper. Oil markets are global; a disruption on this scale cannot be contained geographically. Gulf producers have filled local storage and cut output because wells and downstream infrastructure don’t restart instantly. The longer the strait remains effectively closed, the longer the recovery will take — aftershocks could persist for months or years even if shipping resumes.
Refining is another bottleneck. Refineries cannot quickly scale production back up once the conflict ends. More than 3 million barrels per day of Gulf refining capacity are offline, partly from strike damage and partly because there is nowhere safe to send product. Damage to LNG facilities could be costly and lengthy to repair: QatarEnergy’s CEO warned that an attack on Qatar’s LNG infrastructure could take three to five years to fix. LNG was already tight after Russia’s invasion of Ukraine; with roughly 20% of flows reduced, Asian and European buyers are competing aggressively for remaining cargoes.
The crunch is felt everywhere. South Korea imposed a fuel price cap after gasoline surged in Seoul. In India there was panic buying of cooking‑gas cylinders, government raids and seizures under the Essential Commodities Act, and a jump in sales of induction cooktops. Australia is seeing an unfolding domestic fuel squeeze driven by limited reserves and refining capacity. In the US crude prices rose more than 30% since the war began and the national average for gasoline increased by about $0.50 per gallon. Remove roughly a fifth of global seaborne supply while demand remains, and prices rise across the board.
Governments responded with their largest coordinated release of emergency reserves in IEA history: 400 million barrels, more than double the release after Russia’s 2022 invasion of Ukraine. The US pledged 172 million barrels from its Strategic Petroleum Reserve to be delivered over 120 days; Japan, Germany, Austria, South Korea, Turkey, and the UK also tapped stocks. The price effect was brief. Analysts note that 400 million barrels equal roughly four days of global production and about 16 days of the volume that typically transits the Gulf — supplies that quickly look inadequate if the disruption is prolonged.
Alternative overland routes and pipelines can shift some flows — Saudi Arabia’s East‑West pipeline is one example — but they lack the capacity to replace full strait traffic and are themselves vulnerable to drone and missile attack. Strategic reserves and logistical workarounds are temporary relief; restoring safe passage through Hormuz is the only complete remedy.
Historical parallels are unavoidable. The 1973 oil embargo sent shock waves through the global economy, quadrupling prices and ushering in stagflation. Current models suggest severe economic costs if the strait remains closed: the Dallas Fed estimated a one‑quarter closure could push WTI to an average of $98 per barrel and trim annualized global GDP growth by nearly 3 percentage points, with deeper losses for a longer disruption. Unlike 1973, this crisis stems from active warfare rather than a coordinated export embargo, and physical infrastructure is being damaged while shipping lanes are contested, adding unpredictability.
Analysts warn the pain could intensify. Goldman Sachs cautioned that if transit stays at roughly 5% of normal for ten weeks, Brent could exceed its 2008 high of $147 per barrel. Headlines and market swings follow the tactical rhythm of the conflict: a temporary pause in strikes can calm markets briefly, but the underlying fragility remains.
There are two clear takeaways. First, the vulnerability of the Strait of Hormuz was well known and long modelled, yet the scale of disruption shows a failure to mitigate that single‑point risk. The global energy system was built around a 21‑mile bottleneck and now feels the consequences. Second, economies that diversified supply and accelerated domestic generation — notably through renewables — are better insulated. China, after expanding wind and solar, now has more renewable generation on its grid than fossil‑fuel capacity for the first time. Pakistan’s heavy investment in household and commercial solar following the 2022 shocks has made it one of the world’s largest solar markets. Diversification and local resilience remain the most reliable hedge against commodity shocks.
For now the world watches movements in the Gulf and counts days of stored fuel. In Pune, Vaikunth Dham’s electric furnaces keep operating — a small, practical adjustment in a crisis whose full economic and human consequences have yet to unfold.
This article first appeared in the Pickle Gazette and is republished with permission.
