Analysts warn Strait of Hormuz disruption could trigger one of the largest global energy supply shocks

Wood Mackenzie said on May 20 that a prolonged closure of the Strait of Hormuz would pose the biggest threat to global energy markets in decades. The consultancy said more than 11 million barrels per day of Gulf crude and condensate supply is already curtailed and more than 80 million tonnes per annum of LNG supply is at risk in its worst-case scenario. The International Energy Agency says around 20 million barrels per day of oil transit the strait, about a quarter of world seaborne oil trade, and that most of the world’s spare production capacity is also tied to producers whose exports depend on the route. ### Why does one waterway matter this much to oil and gas? The Strait of Hormuz sits between Iran and Oman and is the main export route for Saudi Arabia, the United Arab Emirates, Kuwait, Qatar, Iraq, Bahrain and Iran, according to the IEA. The agency says about 20 million barrels per day of oil move through it and 80% of those flows are destined for Asia. It also says 93% of Qatar’s LNG exports and 96% of the UAE’s LNG exports transit the strait. (woodmac.com) UN Trade and Development said the strait carries around a quarter of global seaborne oil trade as well as significant volumes of LNG and fertilizers. That means any interruption reaches beyond crude prices into power markets, petrochemicals and farm inputs. ### What exactly are analysts warning about now? (iea.org) Wood Mackenzie said in a May 20 report, “Strait Talking: Iran War Scenarios and the Future of Energy,” that a prolonged closure is the “single greatest threat” to energy markets today. In the scenario outlined in its press release, oil prices could reach $200 a barrel if Hormuz remains shut and Gulf supply stays offline. The firm said it modeled three scenarios tied to the end of the war and the reopening of the strait. (unctad.org) The IEA said the conflict that began on February 28, 2026, has reduced export volumes of crude and refined products through Hormuz to less than 10% of pre-conflict levels. UNCTAD said ship transits through the strait have come to a near halt and later described the waterway as “virtually closed” and “practically closed” in rapid assessments published in March and April. (woodmac.com) ### How does this spread beyond the Gulf? Bab-el-Mandeb links the Red Sea to the Gulf of Aden, and together with Hormuz it forms part of the route connecting Gulf energy exports to Europe and Asia. UNCTAD said the current disruption is feeding through trade, prices and finance, especially for import-dependent and vulnerable economies. The agency said higher oil and gas prices can raise living costs and tighten fiscal pressure in developing countries. (iea.org) The IEA said short-lived disruptions would still have a significant impact on oil markets because alternative pipeline capacity to bypass Hormuz is limited to roughly 3.5 million to 5.5 million barrels per day. That is far below normal transit volumes. ### Where do shipping fuel rules enter the story? Rystad Energy said on May 20 that tighter shipping-emissions rules are exposing how unprepared parts of the fleet remain for cleaner fuels. (unctad.org) In a piece published by OilPrice, Rystad said Norway’s offshore shipping emissions targets are stricter than FuelEU Maritime and could leave much of the current fleet non-compliant by 2029. (iea.org) The European Commission said FuelEU Maritime took full effect on January 1, 2025, and is designed to cut the greenhouse-gas intensity of energy used by ships by promoting renewable and low-carbon fuels. Rystad has said separately that overlapping rules from the EU, IMO and regional regimes are reshaping fuel economics and fleet decisions. (oilprice.com) ### Why does that combination matter for inflation? The IEA said the disruption to oil and gas flows through Hormuz has major implications for energy security and affordability, as well as for the broader world economy. Wood Mackenzie said wholesale oil and LNG disruptions on this scale would affect supply, demand and prices across energy markets. UNCTAD said the effects are already spreading through trade prices and financial conditions. (transport.ec.europa.eu) On May 26, Wood Mackenzie is scheduled to hold a Horizons Live briefing on its Iran-war scenarios and the reopening of the Strait of Hormuz. The IEA has said that resuming transit through the strait is the single most important step to restore stable oil and gas flows and ease pressure on markets and consumers. (woodmac.com) (iea.org)