The Strait of Hormuz: Why the Whole World Is Watching
The Strait of Hormuz is a 34-kilometre-wide channel between Iran and Oman that connects the Persian Gulf to the open ocean. It is the single most critical energy chokepoint on the planet. In 2025, approximately 14 million barrels of crude oil passed through it every day — representing roughly 31% of all seaborne crude flows globally and about 20% of total world oil consumption, according to energy data firm Kpler.
The strait is also the gateway for approximately one-fifth of the world's liquefied natural gas (LNG), primarily from Qatar's Ras Laffan terminal — the largest LNG export complex on earth. About 30% of Europe's jet fuel supply originates from or transits via the strait. In short, when the Strait of Hormuz closes, it does not merely raise prices — it directly threatens the physical availability of fuel for heating, transport, aviation, and industrial production across Asia and Europe simultaneously.
That is exactly what happened on February 28, 2026, when the United States and Israel launched Operation Epic Fury against Iran. Within hours, everything changed.
How the Crisis Unfolded: Day by Day
Pre-War: Insurance Premiums Begin Climbing
War-risk ship insurance premiums for Hormuz transits climb from 0.125% to between 0.2% and 0.4% of ship value per transit — an increase of over $250,000 for a Very Large Crude Carrier (VLCC). Iran quietly ramps oil exports to multi-year highs.
War Begins — IRGC Broadcasts Strait Closure
Operation Epic Fury launches at 9:45 AM Tehran time. Within hours, Iran's IRGC transmits warnings via VHF radio on the international distress frequency to all vessels: the strait is closed and any ship attempting passage will be attacked. Tanker traffic drops 70% within hours. Brent crude jumps 9% to $79.45. WTI rises 8.4% to $72.74. Diesel settles at its highest in nearly three years.
Tanker Traffic Collapses to 4 Vessels
Crude tanker transits drop to just 4 vessels — compared to a daily average of 24 since January. Three of those four are Iran-flagged. Brent settles 6.7% higher at $78, the biggest single-day gain since June 2025. Maersk, Hapag-Lloyd, MSC and CMA CGM halt transit operations. Houthis in Yemen announce resumption of Red Sea attacks on commercial shipping, forcing all Suez Canal traffic to reroute around the Cape of Good Hope.
IRGC Officially Declares Strait Closed
A senior IRGC official formally confirms the strait is shut, threatening to attack any vessel that passes. By midnight, near-zero AIS transponder signals are broadcast from within the strait. European TTF gas benchmark surges from €30/MWh to €46/MWh in a single session. Qatar pre-emptively halts LNG production after drone strikes on Ras Laffan and Mesaieed Industrial City. Over 150 ships anchor outside the strait.
Supertanker Rates Hit All-Time Record
The benchmark freight rate for VLCCs hits an all-time high of $423,736 per day — up 94% from Friday's close — according to LSEG data. EU TTF peaks above €60/MWh, nearly double from the previous week. Iran drones strike Saudi Arabia's Ras Tanura refinery. Major marine war risk insurers — including Gard, Skuld, NorthStandard, American Club and London P&I Club — cancel war risk cover for vessels in the region. Trump pledges US Navy escort for tankers.
Gas Prices Pull Back on Ceasefire Signals
EU TTF drops 12% to below €48/MWh after The New York Times reports Iranian operatives reached out to discuss ceasefire terms. Brent stabilises above $82. IRGC claims full control of the strait. However, Mizuho Bank warns the "war premium" of $5–$15 per barrel remains firmly intact regardless of Trump's naval escort pledges.
P&I Insurance Withdrawn — Economic Closure Confirmed
Protection and indemnity insurance is formally withdrawn for the region, making it economically impossible for most ship owners to transit even if they wanted to. Brent holds above $82. Goldman Sachs raises TTF forecast to €55/MWh. Banks warn of recession risks if disruption persists five or more weeks.
The Price Shock: Every Fuel and Energy Market Hit
The Hormuz closure has struck every major energy market simultaneously — crude oil, natural gas, LNG, diesel, jet fuel, and shipping freight. The table below captures current prices against pre-war levels and analyst forecasts under different scenarios.
| Commodity | Pre-War (Feb 27) | Current (Mar 5) | Change | Forecast if Hormuz Stays Shut |
|---|---|---|---|---|
| Brent Crude (global) | ~$73 / barrel | ~$82–85 / barrel | ↑ +13% peak; +36% YTD | $100 (5 weeks) · $150 (prolonged) · $200 (worst case) |
| WTI Crude (US) | ~$69 / barrel | ~$74–75 / barrel | ↑ +8.4% single session | $95–$120 if conflict extends beyond 4 weeks |
| EU Natural Gas (TTF) | €30 / MWh | €48 / MWh | ↑ Peaked at €60+ · nearly doubled in 48 hrs | €74 / MWh (Goldman Sachs) if LNG halted 1 month |
| Asia LNG (JKM spot) | Normal range | One-year high | ↑ Qatar production halted | Severe shortage in 2–4 weeks (Japan/Korea reserves) |
| Diesel (global) | Normal | Near 3-year high | ↑ Highest since June 2025 | Prolonged disruption if Gulf exports stay halted |
| Jet Fuel (Europe) | Normal | Tightening sharply | ↑ 30% of EU supply at risk | Shortage within 3–4 weeks of full closure |
| VLCC Supertanker Rate | ~$218,000 / day | $423,736 / day | ↑ +94% · All-time record | Further escalation if rerouting around Africa continues |
| War-Risk Insurance | 0.125% of vessel value | Withdrawn entirely | ↑ $250K+ per VLCC transit before cancellation | No cover available; US Navy escort only partial solution |
Source: Al Jazeera — Shutdown of Hormuz Strait Raises Fears of Soaring Oil Prices
Deutsche Bank warned that Brent could surge toward $200 per barrel if Iran enforces a full closure using mines and anti-ship missiles. Wood Mackenzie placed $150 oil as a realistic scenario if the strait remains shut. UBS told clients that even $120 per barrel was possible if the conflict spiralled. A $10 rise in oil prices adds approximately 25 cents per gallon at US pumps within 20 days.
Shipping Paralysed: The Knock-On Effects
Even ships with no connection to Middle Eastern oil are feeling the consequences. The combined shutdown of the Strait of Hormuz and resumed Houthi attacks in the Red Sea means two of the world's most critical shipping routes are simultaneously out of action — forcing vessels to reroute around Africa's Cape of Good Hope, adding weeks to transit times and thousands of dollars in additional costs per voyage.
The Strait of Hormuz carries oil. The Suez Canal/Red Sea route carries container goods. Both are now effectively closed. Adrian Beciri, CEO of Cyprus-based DUCAT Maritime, told CNBC he lost a dry bulk vessel contracted to carry food supplies to West Africa — a route entirely unrelated to the conflict zone — because it was rerouted to avoid both disrupted corridors. "The consequences are far and wide," he said. "This could be quite significant — much like what we saw during Covid."
Maersk — widely regarded as a barometer of global trade — suspended special cargo acceptance in and out of the UAE. Ports including Jebel Ali and Khor Fakkan, which serve as major transshipment hubs in global container networks, are severely disrupted. Iran struck the Jebel Ali port and nearby targets during its missile campaigns, compounding the shipping crisis well beyond oil tankers.
Saudi Arabia's East-West Pipeline (capacity: 7 million barrels/day) and the UAE's Fujairah pipeline offer partial alternatives for oil — but terminal infrastructure at Jeddah is insufficient to offset a full strait closure. OPEC+ approved an increase of just 206,000 barrels per day — less than 1.5% of daily Hormuz throughput — a figure analysts almost universally dismissed as inadequate.
Who Gets Hit Hardest? Country by Country
In 2024, an estimated 84% of crude oil and condensate shipments through the strait were destined for Asian markets. China, India, Japan and South Korea alone account for nearly 70% of all Hormuz oil shipments, according to the US Energy Information Administration.
More than 60% of India's oil imports come from the Middle East. Over half its LNG imports are Gulf-linked and Brent-indexed — creating a simultaneous physical and financial shock. India is pivoting toward Russian crude but faces logistical constraints. Analysts say India faces the largest combined exposure of any country.
The Middle East supplies 75% of Japan's oil imports and 70% of Korea's. South Korea holds around 3.5 million tons of LNG reserves — enough for roughly two to four weeks of stable demand. Japan holds approximately 4.4 million tons. Both nations are in emergency procurement mode. South Korea's net oil imports represent 2.7% of GDP — Nomura flagged it among the most vulnerable globally.
Qatar and the UAE account for 99% of Pakistan's LNG imports and 72% of Bangladesh's — making both nations almost entirely exposed to the Hormuz shutdown on the gas side. Neither has meaningful alternative sources available at short notice.
Europe gets 12–14% of its LNG from Qatar via the strait and 30% of its jet fuel originates from the region. The TTF gas benchmark surged from €30 to €60/MWh within 48 hours — nearly doubling. The ECB faces a dilemma: hike rates to fight energy inflation or cut to support a slowing economy.
The world's largest crude importer. Around 40% of Chinese oil imports transit the strait. China recently moderated Russian crude intake — a restraint it is now likely to abandon entirely. Limited Chinese and Iranian-flagged ships continue to move through the strait, providing a partial buffer unavailable to other buyers.
The war materially improves Russia's competitive position. With Middle East supply disrupted, both India and China face strong incentives to deepen reliance on Russian crude. Norway's Equinor also hit a 52-week stock high as European buyers scrambled for non-Hormuz gas supply. Canada and the US are also net beneficiaries as alternative suppliers.
What Analysts and Officials Are Saying
Three Scenarios: What Comes Next?
How deep and how long the oil price shock runs depends almost entirely on one question: how long does the Strait of Hormuz remain inaccessible? Energy analysts have converged on three scenarios.
Traffic through the strait recovers relatively quickly as a ceasefire or diplomatic off-ramp materialises. Goldman Sachs' base case assumes five more days of very low exports via Hormuz followed by gradual recovery over a month — projecting Brent to average $76/barrel in Q2 2026, and TTF at €55/MWh. Oil prices would likely pull back toward the high $60s to mid $70s.
Goldman Sachs warns that five weeks of disruption could push Brent to $100/barrel. European gas would likely hit Goldman's €74/MWh forecast. Global inflation rises by an estimated 0.5–1 percentage point. The Federal Reserve and ECB face conflicting pressures — higher energy prices fuel inflation, but slowing growth calls for rate cuts. A mild recession in Europe and parts of Asia is a realistic outcome.
Iran successfully mines the strait, destroys Ras Tanura fully, and the conflict extends to direct attacks on Gulf state oil infrastructure. Brent approaches $150–$200/barrel. LNG markets seize up entirely for Japan, South Korea, Pakistan and Bangladesh. This scenario has no precedent in the post-WWII era and would likely trigger a global recession comparable in severity to 2008 or worse. Wood Mackenzie placed the $150/barrel threshold as a realistic possibility — not merely a tail risk — if the strait remains shut.
For now, markets are taking their cues from diplomacy. The partial pullback in European gas prices on March 4 — after reports of Iranian ceasefire feelers — demonstrated just how sensitively energy markets are tracking the conflict. Every word from Washington, Tehran, and the Gulf states now carries an immediate price tag measured in barrels and megawatt-hours.