The Strait of Hormuz, the world’s most critical energy chokepoint, has been effectively blocked by Iran since the U.S. and Israel initiated military action on February 28. Roughly 20 million barrels of oil-alongside major flows of liquefied natural gas and other key commodities-no longer transit the narrow waterway. This shutdown has triggered the most severe global energy supply crisis on record.
What was once an oversupplied oil market has rapidly reversed into a historic deficit. Even aggressive measures-including a record 400 million-barrel release of strategic reserves and temporary sanctions waivers on Iranian and Russian oil-cannot offset the loss. The U.S. shale industry cannot ramp up quickly enough to replace the volume.
Wealthy nations will face soaring fuel prices and recessionary pressure. Developing countries, however, will suffer acute physical shortages. Millions may be forced to abandon clean cooking fuels for biomass, echoing humanitarian crises seen during prior energy shocks.
Alternative routes like Saudi Arabia’s East-West pipeline are only partially operational, rerouting just half their potential capacity. Attacks on UAE infrastructure and Houthi threats in the Red Sea further limit workarounds.
Despite WTI trading below $100, physical markets signal alarm: Middle Eastern crude is trading above $160, and Singapore jet fuel has hit $200 per barrel. With tankers already en route still carrying pre-war supplies, the full impact has yet to hit. A global economic reckoning looms.