Global Energy Crisis Deepens as Strait of Hormuz Remains Closed

A sharp disruption to Middle Eastern supply chains has triggered a global energy crunch, driving up prices and forcing consumers to reduce consumption. The effective closure of the Strait of Hormuz, a vital waterway for oil and liquefied natural gas (LNG) transit, has halted approximately 20% of the world’s supply since the start of the conflict between the United States and Israel against Iran on February 28, 2026.

Impact on Global Energy Supplies

Ongoing strikes by Iran and Israel have targeted energy infrastructure in the Middle East, causing damage to gas fields, oil refineries, and terminals that industry representatives estimate will take years to repair. The International Energy Agency (IEA) has labeled this the worst global energy disruption in history, surpassing even the 1973 Arab oil embargo.

“You’re not going to conserve your way around this. What it’s going to translate to is price rises high enough that people stop consuming,” said Dan Pickering, chief investment officer for Pickering Energy Partners.

So far, the crisis has removed around 400 million barrels – roughly four days of global supply – from the market, resulting in price increases of around 50%. Oil, gas, and their refined products are essential for transportation, heating, industry, and the production of plastics and fertilizers.

Broader Economic Consequences

“The breadth of what is at risk here in fuels, chemicals, LNG and fertilizer inputs is what makes this moment qualitatively different from previous episodes of Gulf tension,” said Aditya Saraswat, senior vice president at consultancy Rystad Energy.

Rising energy prices are fueling inflation, impacting both consumers and businesses. This has become a significant political challenge for U.S. President Donald Trump as he attempts to justify the war to the American public. Trump has criticized NATO allies for their lack of support in the conflict, labeling them “cowards.”

Price Surges and Government Responses

Global benchmark oil prices have risen by more than 50% to over $110 a barrel since the conflict began. Prices for Middle East crudes, a key source for Asian economies, have reached record highs near $164. This has led to soaring transport fuel costs and prompted government action to conserve supplies.

Thailand has instructed civil servants to conserve energy by suspending overseas trips and using stairs instead of elevators, while Bangladesh has closed universities. Sri Lanka has implemented fuel rationing, China has banned refined fuel exports, and the U.K. Government’s contingency plan includes reducing speed limits to save fuel.

Limited Effectiveness of Emergency Measures

The IEA has proposed measures to reduce demand, such as working from home and avoiding air travel, which has already been disrupted by the closure of key Middle Eastern aviation hubs. The IEA also agreed to release a record 400 million barrels of oil from emergency stockpiles, but analysts believe this is insufficient, covering only about 20 days of the supply shortfall.

“The market is facing an acute shortage of products … That cannot be consumed simply because they are not available,” said Natasha Kaneva, a JP Morgan analyst, emphasizing the need for demand reduction.

Jet fuel prices in Europe have reached a record of around $220 per barrel, likely leading to more expensive airline tickets. In the U.S., retail gasoline prices have increased by over $1 a gallon since February 28, reaching around $4 a gallon.

Disruptions to Natural Gas and LNG Supplies

Natural gas prices in Europe and Asia are soaring following retaliatory strikes between Israel and Iran targeting Gulf gas installations. QatarEnergy CEO Saad al-Kaabi stated that Iranian attacks will disrupt 12.8 million tons per year of LNG production, approximately 3% of global supply, for three to five years.

The situation is critical, as oil and gas products are vital to pharmaceuticals, plastics, and fertilizers. Menelaos Ydreos, secretary general of the International Gas Union, called for an immediate end to the targeting of energy facilities and the resumption of cargo traffic through the Strait of Hormuz, stating that fertilizers, petrochemicals, oil, grain, and gas are all critical to human existence.

Threat to Food Security

The conflict also threatens food supply chains. Approximately one-third of global fertilizer trade typically passes through the Strait of Hormuz and is now stalled. Prices for nitrogen-based fertilizers, such as urea, have risen by 30% to 40% since the conflict began, leading to empty shelves for U.S. Farmers ahead of spring planting.

Fertilizer factories in India, Bangladesh, and Malaysia are halting orders, cutting production, or shutting down due to feedstock shortages. Maximo Torero, chief economist with the U.N.’s Food and Agriculture Organization (FAO), warned that continued conflict will significantly disrupt global food supplies, impacting planting and reducing the availability of staple cereals, feed, dairy, and meat.

Approximately half of the world’s food is grown using fertilizers, which can account for up to half the cost of grain production in some countries.