The Hypothetical That Stopped Being One
For most of the past half-century, a shut Strait of Hormuz was the scenario energy analysts ran in spreadsheets and hoped never to see. The numbers were always alarming: a narrow channel between Iran and Oman carrying around 20 million barrels of oil a day, equal to about a fifth of global oil consumption, and roughly a fifth of all traded liquefied natural gas, according to the U.S. Energy Information Administration. Iran threatened to close it many times. It never did.
Then, in the space of a week, it did. The United States and Israel began striking Iran on 28 February 2026. By 2 March the Islamic Revolutionary Guard Corps had declared the strait closed and was attacking merchant ships, and by 4 March it was claiming full control of the waterway. Around 12 March, Iran was reported to have laid about a dozen mines. Tanker traffic fell by more than 90 percent. On 11 March the International Energy Agency said crude and product exports through the strait were running at less than a tenth of their pre-war level. A day later its monthly oil report called this “the largest supply disruption in the history of the global oil market.”
Six months on, the strait has not reopened in any lasting way. It has been declared open and shut again several times, blockaded from both sides, partly swept of mines and fought over almost daily. This piece looks at what the closure has actually done to oil prices and supply, how the world has coped, and what to watch next.
The Geography That Made It Possible
The strait is the only sea route out of the Persian Gulf. At its narrowest point it is about 24 miles wide, and the shipping lanes are narrower still: two lanes, each two nautical miles wide, with a buffer of similar width between them. Almost all the seaborne exports of Iraq, Kuwait, Qatar and Bahrain have to pass through it, and so do most exports from Saudi Arabia and the UAE.
The escape routes were always too small. The EIA puts the capacity of Saudi Arabia’s East-West pipeline to the Red Sea port of Yanbu at 5 million barrels a day and the UAE’s pipeline to Fujairah, on the Gulf of Oman, at 1.8 million. In its June 2025 estimate, only about 2.6 million barrels a day of that pipeline capacity was spare and available to bypass the strait. Saudi Arabia and the UAE began diverting crude through both routes within days of the closure, and Iraq has an older line north through Turkey. Even so, the combined capacity of these routes is less than half of what normally moves through Hormuz.
The rest of the region had nowhere to send its oil, so it stopped producing it. Tankers could not leave, storage filled up and fields shut in. By 12 March, the IEA estimated, Gulf producers had cut output by at least 10 million barrels a day. Iraq’s three main southern fields fell from about 4.3 million barrels a day to 1.3 million within the first 10 days of the war. Kuwait, Bahrain and Iraq all declared force majeure. A crisis that markets had long priced as a shipping problem quickly became a production problem.
What Actually Happened to Prices
The models always predicted a spike, and there was one. How big it looks depends on which price you read, because physical and futures markets diverged sharply.
On 27 February, the last trading day before the strikes, Brent crude in the physical market (the Dated Brent spot price, published by the EIA and the St. Louis Fed’s FRED database) was $71.32 a barrel. Brent futures passed $100 on 8 March for the first time in four years, and March was the largest monthly increase in oil prices on record. Futures peaked somewhere between the high $110s and about $126, depending on the source. The physical market, where buyers pay for cargoes available now, went further: Dated Brent reached $138.21 on 7 April, almost double its pre-war level.
What followed was not a steady plateau but a set of swings that tracked each diplomatic turn:
- The April ceasefire. A two-week ceasefire was agreed on 8 April, and Iran said it would reopen the strait. Spot Brent fell by $16 in one session, to $122.11. The reopening never really happened. Talks in Islamabad had collapsed by 12 April, the United States began blockading Iranian ports on 13 April, and Iran closed the strait again on 18 April after a short window in which both sides said it was open.
- The long slide. Prices eased through May as talk of a deal grew; on 6 May President Trump paused a US Navy escort operation, citing progress toward an agreement. The US blockade of Iranian ports ended on 29 May, and spot Brent finished the month at $92.88.
- The Islamabad Memorandum. On 17 June, President Trump and Iranian President Masoud Pezeshkian signed a memorandum of understanding meant to end the war and lift the blockades of the strait. Iran declared the strait closed again on 20 June, citing continued Israeli strikes in Lebanon, but tanker flows kept rising. The IEA says Gulf oil production recovered by 3.7 million barrels a day in June, and shipments reached their wartime highs in late June. Spot Brent fell to $68.53 on 2 July, below where it had been before the war started.
- The breakdown. On 7 and 8 July, tankers were struck in the strait and the interim truce collapsed. The US Treasury reimposed the oil sanctions it had lifted under the memorandum, the IRGC Navy declared the strait closed on 12 July, and Washington reinstated its naval blockade. Spot Brent rose from $71.78 on 7 July to $105.32 on 23 July.
- The late-summer grind. Spot Brent averaged about $91 in August. On 25 August, US officials said the Navy had cleared mines from the strait’s main shipping lanes, and that underwater drones had found more than 100 suspected mines over the preceding months. Prices dipped briefly, to $87.77 the next day, then climbed again as attacks continued. On 9 September, Dated Brent stood at $109.51.
The lesson for anyone who relied on the old scenario models is mixed. The shock was as large as feared: the physical price of Brent nearly doubled in five weeks. But prices did not stay at the peak. A market that can see an end to the crisis, even a false one, prices that in quickly. By early July the diplomatic signals had almost erased the war premium, even though the strait never returned to normal.
Why the World Didn’t Run Dry
Given the size of the supply loss, the more surprising story may be how much damage was absorbed. Four buffers did most of the work.
Emergency stocks. On 11 March, IEA members agreed to release 400 million barrels from emergency reserves, the largest collective stock release in the agency’s history. That equals roughly four days of global consumption, spread over months. By 21 July, member countries had released around 290 million barrels, and the IEA said governments still held more than a billion barrels in reserve.
Inventories. Stocks overall took an even bigger hit. The IEA estimates that global observed oil stocks fell by 410 million barrels between the end of February and the end of July, an average of 2.7 million barrels a day. In July alone they fell by 69 million barrels. That cushion is finite, and much of it has now been used.
Supply from elsewhere. The IEA says producers outside the Gulf, notably the United States, Brazil, Venezuela and Kazakhstan, raised exports to fill part of the gap. A New York Times analysis of trade up to 8 May found that the United States and Russia gained the most revenue from the shock. Saudi Arabia, which could pipe crude to the Red Sea, also earned more, while Iraq, Kuwait, Qatar and the UAE, which could not get around Hormuz, lost revenue.
Demand destruction. This is the least visible buffer and the most painful. According to the IEA’s July statement, China, a leading buyer of Gulf crude, cut its crude imports by nearly half compared with pre-war levels. In its August report, the agency forecast that world oil demand would fall by 1.6 million barrels a day in 2026. In effect, high prices are rationing oil by pricing some users out.
Even with all four buffers working, the numbers remain stark. In its August report, the IEA said global oil supply in July was 101.5 million barrels a day, 6.3 million below a year earlier, with 8.3 million barrels a day of Gulf production still shut in.
The Shock Beyond Crude
Oil prices are the headline, but some of the worst damage has fallen elsewhere.
Refined fuels. The IEA’s July statement warned that refinery activity and product supplies had not recovered as much as crude deliveries, so diesel, gasoline and jet fuel markets were considerably tighter than crude. More than 4 million barrels a day of refining capacity shut down in the first weeks of the war. In July, diesel and jet fuel exports from Russia, the Middle East and Asia were still well below year-earlier levels, according to the IEA. For truckers, farmers and airlines, those fuel prices matter more than the Brent headline.
Natural gas. QatarEnergy halted LNG production on 2 March after Iranian strikes on its Ras Laffan and Mesaieed industrial sites, and declared force majeure on its contracts two days later. On 18 March a ballistic missile hit Ras Laffan and damaged two of its 14 LNG production units. That cut Qatar’s capacity by about 17 percent, damage Qatari officials say could take three to five years to repair. Europe gets 12 to 14 percent of its LNG from Qatar, and the Dutch TTF gas benchmark roughly doubled in the first days of March, to above €60 per megawatt-hour. By the first week of May, EU Energy Commissioner Dan Jørgensen said member states had paid more than €30 billion extra for fossil fuel imports without receiving any more energy. Europe has also ended up importing record volumes of Russian LNG from the Yamal project, the dependence it spent four years trying to reduce.
Food. The Gulf is a fertilizer superpower. The Atlantic Council estimates the region supplies nearly half of the world’s seaborne urea, and that roughly a third of global fertilizer trade passes through the strait. Urea prices rose by more than 50 percent in the first three weeks of the war, just before the Northern Hemisphere spring planting season. Unlike oil, fertilizer has no coordinated strategic reserves to draw on. The effect on food prices is likely to arrive with a lag, through smaller plantings and lower yields.
Shipping. Before the war, war-risk insurance cost 0.125 percent of a ship’s value per transit. It climbed to between 0.2 and 0.4 percent in the tense weeks before the strikes, then rose four- to six-fold in the first week of March. From 5 March, protection and indemnity cover was withdrawn for the strait. In practice, that closed it to most commercial shipping regardless of what any navy said. By 21 April, the International Maritime Organization counted around 20,000 seafarers and 2,000 ships stranded inside the Gulf. Dubai’s Jebel Ali, the region’s largest container port, handled 90 percent less cargo in the second quarter than a year earlier.
Asia. Asia always had the most to lose. EIA data show that 84 percent of the crude and condensate moving through Hormuz in 2024 went to Asian markets, and China, India, Japan and South Korea alone took 69 percent. Some importers felt it within weeks. On 22 March, as Thailand ran short of fuel, a petrol station there put up an “out of diesel” sign. The Philippines declared a national energy emergency on 24 March. Pakistan moved government offices to a four-day week to save fuel.
The State of Play in September
As of early September, the crisis is worse than it was in midsummer, not better.
The US mine-clearing announcement on 25 August has not brought shipping back. On 30 August, the United States struck military sites on Larak Island, which it said were being used to lay more mines. In the first week of September, Iran reported attacking several tankers that it said were using “unauthorized” routes. On 5 September, amid a standoff in which US forces hit Iranian vessels and Iran fired ballistic missiles at American warships, Tehran announced a prohibited zone around the strait. The analytics firm Kpler counted 27 missile strikes in the strait between 6 July and early September, and reported that no large ships had passed through since the start of the month. Before the war, about 90 ships a day passed through the strait.
Each side’s terms remain far apart. On 8 August, the secretary of Iran’s Supreme National Security Council said Tehran would reopen the strait if the United States changed its conduct, and Iran has said the strait will be accessible only if Washington accepts its conditions. The United States has kept its naval blockade and oil sanctions in place, and President Trump has said he has complete control of the waterway.
The market reflects this. Spot Brent rose by more than $20 between 26 August and 9 September, and the IEA’s August report warned of the risks as inventory buffers are depleted during a season of higher demand.
What to Watch Next
Nobody knows how or when this ends, so it is more useful to watch the signals that will show which way it is going.
Insurance, not declarations. Ceasefires and “the strait is open” announcements have come and gone. The better sign of a real reopening is protection and indemnity insurers covering Hormuz transits again and shipowners sending crews through. Until that happens, a strait that is officially open is still closed in practice.
The stockpile clock. Emergency releases slowed over the summer, and global observed inventories fell by more than 400 million barrels between February and July. The world still has more than a billion barrels of government stocks, but the more of them are used, the less protection they leave against the next shock. Watch the IEA’s monthly stock figures closely.
Diesel and jet fuel margins. The refined-product squeeze is where the next price spike is most likely, especially heading into the Northern Hemisphere winter. Heating oil and diesel spreads are likely to show stress before crude does.
Europe’s gas storage. With Qatari supply down and part of Ras Laffan out for years, how full Europe’s storage is at the start of winter will decide whether this winter’s gas market is tight or in crisis.
Demand destruction versus recession. The IEA’s forecast that oil demand will fall this year is partly good news, since it is how markets rebalance. But demand that falls because economies shrink is much worse than demand that falls because consumers adjust. Watch whether the drop comes mainly from price-sensitive fuel use or from falling industrial output in import-dependent economies.
The Chokepoint, Revisited
For years, the standard argument was that Iran would never really close Hormuz. The threat was worth more than the act, because Iran exports its own oil through the same water and would be inviting overwhelming retaliation. Once the war began, that logic no longer held. For a government under direct military attack, the costs of closing the strait looked different.
What the past six months have shown is that the old scenario models were right about the size of the shock and wrong about how it would play out. There was no single, sustained spike. Instead, the world has absorbed it through emergency stocks, redirected cargoes, lost growth and a sharp fall in oil demand. Much of that cushioning has now been used up.
On the day this is published, the strait remains mostly closed, Brent is back above $100, and each new reopening deal has so far failed to hold. The world spent decades underestimating what Hormuz could do. The risk now is assuming the worst has already passed.