Strait of Hormuz Crisis: Impact on Global Oil Prices and Shipping
Gas prices are rising as the conflict between the U.S., Israel, and Iran escalates, with a key factor being the disruption to oil flow through the Strait of Hormuz. The closure, or threatened closure, of this vital waterway is sending ripples through global energy markets and supply chains.
What is the Strait of Hormuz?
The Strait of Hormuz is a strategically important waterway connecting the Gulf to the Indian Ocean, situated between Iran and Oman. It’s approximately 50 kilometers (30 miles) wide and no more than 60 meters (200 feet) deep, making it a vulnerable chokepoint for maritime traffic [1]. Iran controls several islands near the strait, including Hormuz, Qeshm, and Larak, giving it significant influence over the area [1].
Why is it Important for Oil?
Approximately 20% of the world’s daily oil supply passes through the Strait of Hormuz [2] and a similar share of global Liquefied Natural Gas (LNG) shipments, primarily from Qatar [2]. Major oil producers like Saudi Arabia, Iran, Iraq, and the United Arab Emirates rely on this route to reach markets in Asia and beyond [2].
Current Situation: Strait Closure and Oil Prices
Following joint military strikes by the United States and Israel on Iran on February 28, 2026, Iran’s Islamic Revolutionary Guard Corps (IRGC) issued warnings prohibiting vessel passage through the Strait of Hormuz [3]. While Iran has not officially confirmed the order, reports indicate the strait is effectively closed to shipping [2]. Initially, tanker traffic dropped by approximately 70%, with over 150 ships anchoring outside the strait, but traffic has since come to a standstill [3].
This disruption has already caused a surge in oil prices, with Brent crude rising up to 13% to US$82 per barrel amid fears of prolonged supply shortages [3]. Experts anticipate that increased crude oil prices will translate to higher gasoline prices at the pump, as well as increased transportation and shipping costs for all goods [1].
Impact on Global Trade
The closure of the Strait of Hormuz impacts not only oil and LNG but as well global trade as a whole. The U.S., while not heavily reliant on Middle Eastern oil, imports from Canada and is interconnected with the global market. Countries like China and India, which heavily depend on oil from the Persian Gulf, are particularly vulnerable [2].
What’s Next?
Experts suggest there is a 70% chance gasoline prices in the U.S. Will remain unaffected, but a continuation of the conflict could lead to widespread price increases. The situation remains fluid, and the duration of the Strait of Hormuz closure will be a key factor in determining the long-term economic consequences [3]. No country involved directly benefits from the shutdown, as it disrupts oil production and trade for all parties [1].