Strait of Hormuz on the Brink: De Facto Closure Drives Oil Surge and Global Energy Crisis Fears

By IndraStra Business News Desk

Shipping through the Strait of Hormuz, the narrow waterway between Iran and Oman that carries roughly one-fifth of the world’s seaborne crude oil and a similar share of global liquefied natural gas, has slowed to a virtual standstill in the wake of escalating military conflict between Iran, the United States and Israel, sending energy prices sharply higher and raising concerns about sustained inflationary pressures across the global economy. Traffic through the vital chokepoint has dropped by at least 70 percent since late Saturday and by as much as 80 percent in the following days, with most commercial operators, major oil companies and insurers effectively withdrawing from the corridor amid direct attacks on vessels, threats from Iranian forces and soaring war-risk insurance costs.
Iranian officials and military commanders have issued stark warnings that have contributed to the de facto closure. A commander in Iran’s Revolutionary Guard Corps declared on Monday that the strait was “closed” and that any vessel attempting to pass would be set “ablaze.” Mariners received a message via the international distress frequency stating that the strait was closed, prompting most ships to pause. “Every ship in the area would have heard that… and it was enough for most ships to pause,” Cormack McGarry, director of maritime intelligence and security services at Control Risks, told Al Jazeera. At least five tankers have been damaged and two personnel killed in attacks on either side of the strait, while satellite navigation disruptions and electronic interference have further complicated operations. About 150 ships are stranded around the waterway, and major container lines including Maersk and Hapag-Lloyd have suspended all shipments through the strait due to security concerns.
The resulting slowdown has produced immediate and pronounced effects on energy markets. Brent crude jumped by as much as 13 percent to $81.57 a barrel on Monday morning before easing to just shy of $77.53 later in the day, marking a 6.4 percent increase on the previous week and the highest level in more than a year. West Texas Intermediate rose 6.3 percent to $71.23 a barrel, while international Brent settled around $77.74 after a 6.7 percent gain. European natural gas futures spiked more than 40 percent, reaching 45.46 euros per megawatt-hour for April delivery, with the Dutch TTF front-month contract closing 39 percent higher after an intraday rise of 50 percent. Oil prices briefly topped $82 a barrel in some trading, the highest since January 2025. Supertanker rates for very large crude carriers on the key Middle East-to-China route reached an all-time high of W419 on the Worldscale measure, equivalent to $423,736 per day, having doubled from Friday. LNG tanker rates surged more than 40 percent, with Atlantic rates climbing to $61,500 per day and Pacific rates to $41,000 per day.
These price movements reflect not only the immediate reduction in tanker movements but also precautionary shutdowns at key production and export facilities across the region. QatarEnergy, which accounts for about 20 percent of global LNG supply, halted production at its facilities in Ras Laffan and Mesaieed after Iranian drone attacks and declared force majeure on LNG shipments. Saudi Aramco shut its 550,000-barrel-per-day Ras Tanura refinery, a critical Gulf coast complex and export terminal, as a precautionary measure following a drone strike; two drones were intercepted, debris caused a limited fire, but no injuries were reported and local petroleum supply was unaffected. Major Israeli gas fields operated by Chevron, including Leviathan and Tamar, were instructed to shut down temporarily, throttling exports to Egypt, while smaller fields served by Energean also ceased production. Most oil output in Iraqi Kurdistan, previously around 200,000 barrels per day, was halted by operating companies as a precaution.
The Strait of Hormuz’s strategic importance amplifies the disruption. The waterway, almost 100 miles long and as narrow as 21 miles at its widest point with two-mile-wide shipping lanes, handled approximately 13 million barrels per day of oil in 2025, or about 31 percent of global seaborne crude flows, along with roughly one-fifth of worldwide LNG exports, primarily from Qatar. Nearly 70 percent of crude oil shipments through the strait are destined for Asia, with China, India, Japan and South Korea among the largest recipients. One-third of global urea fertilizer trade also transits the route, raising potential concerns for agricultural costs. Alternative pipelines exist for limited volumes—Saudi Arabia can divert up to 5 million barrels per day via its East-West Pipeline to the Red Sea, and the United Arab Emirates can route 1.5 million barrels per day through the Habshan-Fujairah line—but these cannot fully replace strait traffic for most Gulf exporters, including Iraq, Kuwait, Qatar and Bahrain.
Analysts have described the situation as a de facto closure driven by risk aversion rather than a physical blockade. “It is de facto closed in that no one dares to go through. You can be attacked, and you can’t get insurance or it is extremely expensive, so you have to wait until the security situation is better,” Arne Lohmann Rasmussen, chief analyst at Global Risk Management, told CBS News. Many insurers have withdrawn coverage for war risks in the Persian Gulf, and shipowners have suspended operations indefinitely. “Iran has essentially two ways to close the strait. One is to harass or attack ships, and the other is to lay down mines. And without a Navy, both of those things would be difficult,” Kevin Book, managing director at Clearview Energy Partners, told both AP News and CBS News. Iranian Foreign Minister Abbas Araghchi stated that the country “has no intention of doing so” regarding a formal closure of the strait.
Despite the threats, limited traffic has continued, primarily involving vessels flying the flags of Iran and China, with some ships possibly switching off their Automatic Identification Systems. Iran had ramped up oil exports to multi-year highs in February in anticipation of strikes, and Gulf states front-loaded supplies to buffer short-term shortfalls. OPEC+ agreed to increase output by 206,000 barrels per day starting in April, though analysts questioned whether this would meaningfully offset disruptions.
The economic ripple effects are already being felt and could intensify depending on the duration of the slowdown. In Asia, which faces the greatest vulnerability, countries with high energy import dependence are most exposed. South Asia is particularly at risk: Qatar and the UAE supply 99 percent of Pakistan’s LNG imports, 72 percent of Bangladesh’s and 53 percent of India’s. Pakistan and Bangladesh have limited storage and procurement flexibility, raising the prospect of rapid power-sector demand destruction. India, with more than half its LNG imports Gulf-linked and 60 percent of its oil imports from the Middle East, faces a dual physical and financial shock as Brent-indexed contracts amplify price rises alongside higher import costs and current-account pressures. China, the world’s largest crude importer, buys over 80 percent of Iranian oil and routes 40 percent of its oil imports and 30 percent of its LNG imports through the strait, though it maintains strategic reserves that provide some cushion. Japan receives 75 percent of its oil from the Middle East, South Korea 70 percent, and both nations along with Taiwan rely heavily on Gulf LNG, albeit at lower shares.
Nomura analysts noted in a report that “Thailand, India, Korea and the Philippines are the most vulnerable to higher oil prices, due to their high import dependence, while Malaysia would be a relative beneficiary since it is an energy exporter.” Katayama of Kpler observed that “Pakistan and Bangladesh have limited storage and procurement flexibility, meaning disruption would likely trigger fast power-sector demand destruction rather than aggressive spot bidding,” and that for India, “more than half of its LNG imports are Gulf-linked, and a significant share is Brent-indexed, so a Hormuz-driven crude spike would simultaneously lift oil import costs and LNG contract prices. That creates a dual physical and financial shock.” China, by contrast, is “materially exposed but more flexible,” according to the same analyst. Shier Lee Lim, lead macro and FX strategist for APAC at Convera, added that “economies with high energy import reliance such as Japan, South Korea, and Taiwan are more exposed to supply shocks,” while spot-reliant LNG buyers “would face sharply higher replacement costs as Asia competes with Europe for Atlantic cargoes.”
In Europe, where inventories are low following the loss of Russian pipeline supplies, a sustained disruption could triple wholesale gas prices to $100 per MWh if the strait remains closed for three months or operates at half capacity for six months, with significant inflation implications. Australia, though a net energy exporter, would see petrol prices rise—each $1 increase in global oil adds 1 cent to a litre at the pump—with unleaded potentially reaching $2.20-$2.40 per litre in a worst-case scenario above $100 per barrel. The United States, as a net energy producer and the world’s largest oil producer, stands to benefit from higher prices in the short term, though sustained spikes could still weigh on consumers and broader growth.
Economists have characterized the shock as stagflationary. Johnathan McMenamin, head of economic forecasts at Barrenjoey, said “it is generally stagflationary. It increases inflation directly through high bowser prices but it can spill over into broader prices. At the same time, it tends to reduce growth through a reduction in the people’s ability to spend.” Subitha Subramaniam, chief economist and head of investment strategy at Sarasin & Partners, warned that “it will start to cascade into other prices such as food, agriculture, industrial commodities and that’s just going to really bleed into inflation.” Joseph Capurso, head of global economics at Commonwealth Bank of Australia, described the current state of play as “one of the worst for the global economy,” adding that “we expect the situation to escalate before it de-escalates” and highlighting uncertainty over Iran’s intent and capability to block the strait.
Yet several analysts cautioned against assuming a prolonged total shutdown. Cormack McGarry told Al Jazeera that Iran would be “tightening the noose around its own neck” by pursuing a full closure and that “the idea they could affect a long-term sustained closure of the strait is completely unlikely,” though he expressed greater concern for regional supply chains. Rachel Ziemba, senior adjunct fellow at the Center for a New American Security, noted that “consumer sectors lose, but producers benefit. The question is: How long will this last? It’s hard to remain at this intensity for great lengths of time.” Holger Schmieding, chief economist at Berenberg bank, forecast that oil prices would return to $65-$70 per barrel after a near-term spike, provided the strait is not effectively closed for more than a few weeks, and suggested that political considerations in Washington could encourage efforts to prevent lasting surges ahead of U.S. midterm elections. Saul Kavonic, head of energy research at MST Marquee, observed that “the market isn’t panicking” and pointed to clarity that oil transport and production infrastructure had not been a primary target so far, while Robin Mills, chief executive at Dubai-based consultancy Qamar Energy and a former Shell executive, noted that prices remain below levels seen two years ago and “we’re not in full-blown oil crisis mode yet.”
The situation remains fluid, with market participants closely watching for any resumption of tanker traffic through the strait or further attacks on energy infrastructure. Rerouting vessels around the Cape of Good Hope would add days to delivery times and thousands of dollars in additional war-risk and contingency insurance costs, exacerbating supply-chain pressures at a time when many industries are sourcing raw materials for seasonal demand. While preemptive stockpiling by Gulf producers and strategic reserves in major consuming nations offer some buffer, analysts warn that a sustained disruption lasting weeks or months could push oil prices into triple digits, trigger significant drag on the world economy and potentially tip vulnerable regions into recession. For now, the near-closure of the Strait of Hormuz has already delivered a sharp reminder of the fragility of global energy flows and the speed with which geopolitical shocks can translate into higher costs for households and businesses worldwide.

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