The Strait of Hormuz Crisis — Oil Markets and the Global Supply Shock

A near-total shutdown of the Strait of Hormuz has sent oil prices to multiyear highs, threatening global inflation and supply chains.

The Strait of Hormuz is a 21-mile-wide waterway between Iran and Oman. It does not look like much on a map. But roughly 20% of all oil traded globally by sea passes through it each day — about 20 million barrels. So does nearly 19% of the world’s liquefied natural gas (LNG — natural gas cooled to liquid form for transport by ship). There is no meaningful alternate route.

As of March 21, 2026, it is nearly closed.

A Conflict Three Weeks In

On February 28, 2026, the United States and Israel launched a coordinated military operation — called Operation Epic Fury — targeting Iranian military facilities and nuclear sites. Iran responded with retaliatory strikes on U.S. bases, Israeli territory, and Gulf oil infrastructure. Iran’s Islamic Revolutionary Guard Corps (IRGC) then issued warnings prohibiting commercial vessels from passing through the Strait.

Three weeks later, the numbers are stark. Maritime traffic through the Strait has collapsed by approximately 95% from prewar levels. Where more than 100 vessels transited daily before the conflict, fewer than 21 tankers have passed since late February. More than 150 ships are anchored at sea, waiting.

Peter Orszag, CEO and Chairman of Lazard — one of Wall Street’s most prominent investment banks — noted this week: “As the U.S.–Israel–Iran conflict enters its third week, the Strait of Hormuz remains effectively closed… Even with U.S.-led naval escort operations, only a limited resumption of traffic would be possible.”

Oil Prices Jump to Levels Not Seen in Years

The oil market did not wait for clarity. Brent crude — the international benchmark for oil prices — crossed $100 per barrel on March 8, for the first time since 2022. It peaked near $126 in mid-March. As of March 20, Brent sits at $112.19 per barrel — a roughly 56% increase from its pre-crisis price of approximately $72 on February 27.

West Texas Intermediate (WTI), the U.S. oil benchmark, sits at $98.32 per barrel.

Daan Struyven, Head of Oil Research at Goldman Sachs, said: “Brent is likely to exceed its 2008 all-time high if depressed flows keep the market focused on the risk of lengthier disruptions.” The 2008 record stands at $147 per barrel. Greg Newman, CEO of Onyx Capital Group, was more direct: “I don’t think it’s ridiculous at all to be $200 [per barrel].”

Shipping Costs and Supply Chains

The shock extends far beyond crude oil. War risk insurance for tankers — previously around $100,000 per Strait transit — has jumped to approximately $400,000, according to Lloyd’s of London, a 300% increase compared to early 2025. Major carriers including Hapag-Lloyd are charging war risk surcharges of up to $1,500 per container.

Qatar, which represents roughly 20% of global LNG supply, has seen an estimated 17% of its export capacity disrupted by attacks on its infrastructure. European natural gas futures jumped 30% following attacks on Qatari LNG facilities. Ships rerouting around Africa’s Cape of Good Hope add 10 to 14 days to transit times, raising costs across industries from automobiles to agriculture.

The Consumer Impact

The disruption has reached American gas stations. The national average for a gallon of regular gasoline hit $3.91 by mid-March — the highest since October 2022 — after rising nearly 80 cents in a single month.

Christine Lagarde, President of the European Central Bank (the eurozone’s equivalent of the U.S. Federal Reserve), warned: “The war has made the outlook significantly more uncertain and will have a material impact on near-term inflation… it is creating upside risks for inflation, primarily through oil and gas markets.”

Goldman Sachs estimates sustained high oil prices could add 0.5 to 0.6 percentage points to headline inflation across major economies and trim global GDP growth by 0.3 to 0.5 percentage points. In response, the International Energy Agency (IEA) authorized the release of 400 million barrels from member nations’ strategic reserves on March 11 — the largest emergency release in the agency’s 51-year history.

What to Watch

Energy Markets: The critical threshold to monitor is $147/barrel — the point at which Brent would surpass its 2008 all-time high. Every diplomatic or military development will move oil prices sharply. Watch for announcements on Iran’s selective passage policy, which currently allows ships from China, India, and Pakistan to transit while blocking those from the U.S. and Western allies.

Earnings: Airlines, container shipping companies, and logistics firms will report in the weeks ahead. Investors will be looking for the first hard data on margin impact from surging fuel and freight costs. Delta Air Lines and United Airlines are among the names to follow.

Broader Market: The U.S. Dollar Index (DXY) tends to strengthen during geopolitical uncertainty, pressuring emerging market economies that carry dollar-denominated debt. The Federal Reserve’s next moves will depend partly on whether it views rising inflation as a temporary, supply-driven shock or a longer-term threat requiring a policy response.