While not a formal legal blockade, the Strait of Hormuz has become a high-risk combat zone, leading to a near-total halt in commercial shipping. The withdrawal of major shipping companies and a tenfold surge in war-risk insurance premiums have created a de facto closure for most global commercial traffic.
Iran’s Revolutionary Guard Corps declared the Strait “closed” on March 2, issuing VHF radio warnings to all vessels that any ship attempting passage would be “set on fire.”
Commercial traffic has dropped to near zero as major shipping firms including Maersk, MSC and Hapag-Lloyd suspended operations. Over 150 tankers are currently anchored outside the Strait, unable or unwilling to risk transit.
At least 10 commercial vessels have been attacked since the conflict began, resulting in at least seven fatalities among seafarers as of March 9.
The Strait is the world’s most critical energy chokepoint, normally carrying 20 percent of global oil and 20 percent of global liquefied natural gas.
Oil prices surge past $100 per barrel
Brent crude prices surpassed $100 per barrel on March 8, for the first time in four years.
Approximately 20 million barrels per day, or 20 percent of global supply, and 20 percent of global LNG, primarily from Qatar, are normally transported through the strait.
Iranian drone strikes recently forced the shutdown of Qatar’s Ras Laffan LNG facility and Saudi Arabia’s Ras Tanura refinery, further tightening supply.
Tanker traffic has dropped by 90 percent as major firms like Maersk and MSC suspend transits due to missile threats and the cancellation of war-risk insurance.
Major regional producers including QatarEnergy have suspended production because they cannot export their products through the blocked Strait.
Iran has signaled it may only allow Chinese-linked vessels to pass, while explicitly targeting ships from the US, Israel and their Western allies.
Countries like Iraq have already begun halting production as onshore storage tanks reach capacity because oil cannot be shipped out.
Market impact and price shocks
Brent crude prices jumped nearly 30 percent in a single week, with intraday highs breaching $90 before climbing further toward $110.
European wholesale gas prices, measured by the Dutch TTF benchmark, surged 35 percent in a single day and are up 76 percent for the week.
QatarEnergy, representing 20 percent of global LNG exports, completely halted production following drone strikes on its facilities at Ras Laffan and Mesaieed.
Tanker traffic through the strait plummeted by 86 to 90 percent. War-risk insurance premiums spiked by 50 percent, making unescorted transit economically unviable for major carriers like Maersk and Hapag-Lloyd.
Regional and global consequences
China, India, Japan and South Korea are the most vulnerable, as they receive nearly 70 percent of the crude flowing through the strait.
South Korea’s Kospi index plunged over 8 percent, triggering multiple circuit breakers.
India faces an additional $13 to $14 billion in import costs for every $10 increase in oil prices.
The loss of Qatari LNG severely threatens Europe’s efforts to diversify away from Russian gas, potentially tripling domestic gas prices.
Producers in Iraq, Kuwait and Saudi Arabia have begun scaling back or halting output as storage capacities reach their limits due to blocked export routes.
Market and industry responses
In a move that surprised analysts, OPEC+ approved only a modest production increase of 206,000 barrels per day for April. The group is reportedly holding back its 3.5 million barrels per day spare capacity as a buffer in case the conflict escalates.
Experts at Goldman Sachs warned that without a resolution, prices could reach $150 per barrel by the end of March. Carriers like Flexport noted that the Strait is “effectively closed” because insurers are no longer willing to cover the risk.
The US has pledged up to $20 billion in war-risk insurance to encourage shipowners to resume transit, though many remain reluctant.
While Saudi Arabia operates a 5 million barrel-per-day East-West pipeline to the Red Sea, it cannot fully offset the total loss of the strait’s capacity.
The International Energy Agency is monitoring the situation for a potential coordinated release of emergency oil stocks.
In a post on Truth Social shortly after oil prices breached $100 per barrel, President Donald Trump dismissed the economic shock as temporary.
Read also: Iran’s President apologizes to Gulf states, but rules out ‘unconditional surrender’
