As fighting in the Middle East shows no sign of easing, the region has once again become the centre of a global economic shock. After unprecedented US and Israeli strikes on Iran, Tehran has shut the Strait of Hormuz, one of the most important shipping routes in the world.
The Strait of Hormuz is the world’s most critical maritime chokepoint. About 15 million barrels of crude oil—roughly 20 per cent of global oil supply—pass through it every day. Large volumes of liquefied natural gas also move through the strait. With it effectively closed, international shipping in the area has largely come to a halt.
Some of the world’s biggest shipping lines have suspended operations in the region. Companies such as Mediterranean Shipping Company, Hapag-Lloyd, CMA CGM and Maersk have ordered their vessels to avoid the strait, seek shelter or reroute for safety. The risks are simply too high.
The immediate logistical impact is severe. Around 170 container ships, with a combined capacity of about 450,000 TEU, are effectively trapped inside the Gulf with limited exit options. At least 150 oil tankers are waiting outside, anchored in open waters. Insurance costs for any ship attempting to pass through the area have surged sharply, making voyages commercially unattractive.
There are a few practical alternatives. Jebel Ali Port, one of the region’s main hubs, was temporarily shut after a fire reportedly caused by falling rocket debris. With major ports disrupted, shipping companies are offloading cargo at secondary ports and arranging onward transport by road. This is a slower and more expensive process and is already causing congestion across the region.
The disruption in the Gulf comes on top of existing strains in global shipping. Renewed threats from Iran-backed Houthi forces in the Red Sea have made routes through the Suez Canal unsafe. As a result, many vessels are already sailing around the Cape of Good Hope, a far longer journey that ties up millions of containers’ worth of shipping capacity. The closure of Hormuz compounds these pressures and tightens global supply chains further.
Financial markets reacted immediately. Oil prices surged on fears of a prolonged supply shock. Brent crude rose as much as 13 per cent in early trading, reaching $82 a barrel, a 14-month high. West Texas Intermediate climbed around 8 per cent to $72 a barrel. Stock markets in Asia fell sharply. Japan’s Nikkei 225 dropped 2.4 per cent, while Australia’s S&P/ASX 200 opened lower. Gold prices jumped as investors sought safety.
OPEC+ has announced that it will increase production by 206,000 barrels per day from April. Saudi Arabia had already raised exports in February to build a short-term buffer. Yet these steps offer only limited reassurance. The core problem is not how much oil is being pumped, but whether it can be transported safely. Extra supply on paper does little if tankers cannot leave the Gulf.
The wider economic consequences could be serious. Analysts warn that if the crisis continues, oil prices could rise above $100 a barrel, pushing up fuel costs worldwide and subsequently, inflation. Estimates suggest that if Brent crude reaches $100, global inflation could rise by 0.6 to 0.7 percentage points. For economies already struggling with high prices, this would feel like a direct tax on households and businesses.
There is also a strategic contradiction in Iran’s move. By closing the strait, Tehran harms the global economy, but it also damages itself. Iran’s own oil exports, about 1.6 million barrels per day, depend on access to these waters. Much of that oil goes to China. Oil revenue remains a key source of government income for a heavily sanctioned economy. A prolonged shutdown would squeeze state finances at a time of military and political strain. Some analysts speculate that Iran could quietly allow certain vessels, particularly those linked to China, to pass through.
The crisis highlights the fragility of the global energy system. Two of the world’s most important sea routes are now under threat at the same time. Until tensions ease and shipping resumes, the global economy will remain vulnerable to further price shocks, supply shortages and rising inflation.