A joint United States–Israel strike on Iran that began on February 27 has drawn the region into a fast‑escalating confrontation. Iran retaliated with strikes on US bases in neighbouring countries, including incidents reaching Qatar and Oman, and announced the closure of the Strait of Hormuz — even threatening to set ships on fire if they attempt to transit it.
The Strait of Hormuz is a 55‑kilometre‑wide channel between Iran and Oman that links the Persian Gulf to the Arabian Sea. It is one of the world’s most important shipping chokepoints for energy: typically about 13 million barrels per day pass through, roughly 31 percent of global oil shipments. Since Iran announced the closure, maritime traffic through the strait has fallen by roughly 70 percent, leaving 18 loaded and 37 unloaded tankers stranded in the Persian Gulf. Any interruption to this flow quickly ripples through global markets.
Immediate market effects
The disruption has already pushed benchmark oil prices higher. On March 2, Brent crude reached about USD 79 per barrel (roughly an 8 percent increase from the previous week) and West Texas Intermediate hit about USD 71 per barrel (around a 6 percent rise). Even a short‑lived, partial closure in February 2025 produced a roughly 6 percent spike in prices. Those commodity moves are filtering through to retail pump prices in the US and Canada, though consumer price changes have been muted compared with wholesale shifts. Price pressure is likely to persist while tanker movements remain constrained.
Why this matters to exporters
Closure of the strait affects major export ports in Iraq, Kuwait, Saudi Arabia and the United Arab Emirates, as well as Iranian terminals. For several of these countries the Persian Gulf route is their principal path to global markets. Saudi Arabia’s Ras Tanura, the kingdom’s largest export port, sits on the Gulf; a recent drone attack also damaged a nearby refinery. A total closure could remove at least five million barrels per day of shipments originating from ports like Ras Tanura. Rerouting that volume to alternative ports such as Yanbu on the Red Sea would be difficult and slow, especially when refining capacity is already under strain from the conflict.
Lessons from past crises
Historical oil shocks show how price spikes can feed broader economic downturns. The 1973 OAPEC embargo caused oil prices to quadruple in two months and contributed to a global recession. The 1979 disruption after the Iranian Revolution cut global output by about 7 percent and doubled crude prices into early 1980, producing fuel shortages and economic pain.
Today’s market is different in important ways. Iran accounts for a smaller share of world oil production — about 4 percent of annual output — while the US, Saudi Arabia and Russia are larger producers (US ~22%, Saudi ~11%, Russia ~11%, Canada ~6%, China ~5%, according to the US Energy Information Administration). OPEC is not aligned with Iran, and a coalition of producers including Russia has agreed to boost output by roughly 206,000 barrels per day to help stabilise markets. Those factors reduce the likelihood of a repeat of the 1970s‑level shock, but they do not eliminate acute short‑term disruption driven by chokepoint closures.
The wildcard: the strait itself
The central risk is the Strait of Hormuz. Its geography concentrates a very large share of seaborne oil trade into a narrow corridor. Even if global supplies are sufficient in aggregate, the logistical task of moving, storing and refining suddenly displaced volumes is complex. If tanker traffic remains blocked, refinery operations, shipping insurance costs, and regional export logistics could all be impaired — sustaining higher prices and increasing economic uncertainty.
Bottom line
A prolonged or total closure of the Strait of Hormuz would have outsized effects on global energy markets and could elevate inflationary and economic risks worldwide. Short of that, even partial disruptions are enough to push prices higher and strain supply chains. Policymakers, producers and market participants will watch tanker movements, export port operations and refinery capacity closely to judge how long the pressure may last.
