Global Economic Risks Loom If the Strait of Hormuz Is Disrupted After US-Israeli Strikes on Iran
Any shutdown or disruption to the Strait of Hormuz—widely recognized as the world’s most critical energy chokepoint—triggered by US-Israeli attacks on Iran would not remain limited to the Persian Gulf. Industry analysts warn the crisis could spark a new global inflation shock, complicate central bank monetary policy planning, and amplify downward currency pressure on net energy-importing nations.
Iran’s semi-official Tasnim News Agency confirmed the “Strait of Hormuz is shut down” shortly after the early-morning strikes on Iran on February 28. Commercial vessels operating near the waterway have also received VHF radio warnings from Iran’s Islamic Revolutionary Guard Corps stating “no ship is allowed to pass the Strait of Hormuz.” On Sunday morning, Omani authorities confirmed an oil tanker was attacked off the country’s port of Khasab, which sits directly within the Strait of Hormuz. The party responsible for the strike has not been identified.
Why the Strait of Hormuz Is Indispensable to Global Energy
U.S. Energy Information Administration data shows that roughly 20 million barrels of crude oil and refined petroleum products passed through the strait daily in 2024—equal to approximately one-fifth of total global oil consumption.
The waterway is also a core artery for global natural gas markets, with roughly 20% of all worldwide seaborne liquefied natural gas (LNG) trade moving through the corridor connecting Gulf production hubs to open ocean shipping lanes.
In practical terms, any extended disruption would immediately remove a large share of the world’s total energy supply from global markets.
Legal Standing and Early Market Responses
The United Kingdom’s official maritime security monitoring body, United Kingdom Maritime Trade Operations (UKMTO), notes that radio announcements declaring the strait closed carry no legal weight under international law. Per the United Nations Convention on the Law of the Sea, unimpeded transit through international straits remains protected unless access is physically blocked by force.
Even so, global markets and major shipping firms almost always react to risk signals long before a formal, fully enforced blockade takes effect.
Data cited by S&P Global Commodity Insights shows vessel traffic through the strait fell by roughly 40-50% within hours on Saturday, as existing ships raced to exit the high-risk area and incoming vessels paused before entering.
The firm’s Commodities at Sea monitoring also recorded average outbound oil and product flows of 20.4 million barrels per day for February to date, slightly below January’s levels—confirming that geopolitical tension alone can slow shipments before any physical disruption occurs.
“Hormuz risk is not only about full closure, but also fleet productivity. If Iran escalates by seizing tankers or using drones to threaten commercial traffic, voyage times and costs for Middle East oil exports will rise further,” S&P Global CERA analysts explained.
Dozens of major shipping companies have already confirmed they are diverting vessels away from the Strait of Hormuz, and expect widespread delays and shipment rescheduling across their global networks.
What a Full Closure Would Mean for Global Supply
There is no alternative export route with a comparable capacity to the Strait of Hormuz. While Saudi Arabia and the United Arab Emirates operate overland bypass pipelines, these only accommodate a fraction of total Gulf energy flows. Iraq, Kuwait, and Qatar have no viable large-scale alternatives to the strait.
If the strait were formally closed, most Gulf oil exports would be cut off from global markets almost immediately. Even if Saudi Arabia and the UAE ran their bypass pipelines at maximum capacity, analysts estimate roughly two-thirds of Gulf exports would still remain stranded.
Global LNG markets would also face severe disruption. Qatar, the world’s largest LNG exporter, depends almost entirely on the Strait of Hormuz to ship its product to global buyers. If the route were blocked, major Asian buyers would lose access to their core LNG supplier within days. Major Asian economies including Japan, South Korea, China, and India rely heavily on imported LNG to generate electricity for homes and businesses.
Shifting supply to alternative sources, such as Atlantic basin producers, would require longer shipping routes and far higher transportation costs, which would push energy prices even higher.
How Disruption Would Impact Consumers and Global Economies
Historical economic modeling shows a sudden loss of Gulf supply would send oil prices soaring sharply in a very short period.
If prices spike, impacts would reach global consumers almost immediately: higher fuel prices at the pump, more expensive airfare, and rising transportation costs that filter through to push up prices for food and all other consumer goods.
Financial markets typically price in disruption risk long before physical shortages appear: oil futures would jump, transportation sector equities would weaken, and currencies of major energy exporters would strengthen as traders adjust for supply risk.
Global strategic petroleum reserves can moderate the shock, but coordinated releases take time, and reserve volumes cannot fully replace the specific Gulf crude grades that most refineries are engineered to process.
For Gulf nations themselves, halted exports would quickly strain government finances. Iraq, Kuwait, and Qatar rely heavily on oil export revenues to fund public spending, and if shipments stop, onshore storage facilities would fill rapidly, forcing producers to cut output and lose critical income.
Impacts would extend far beyond energy: tanker rerouting, higher insurance premiums, and formal naval risk zone designations all push up freight rates for bulk commodities and container shipping, creating cascading delays across the entire global logistics network.
This story originally appeared on WIRED Middle East.
