Strait of Hormuz Closure Shocks LNG Market
The closure of the Strait of Hormuz is disrupting global LNG markets, removing 1.5 million tonnes per week. This intensifies European power price volatility and forces rationing in South Asia, threatening broader market turbulence. The crisis affects shipping, insurance, and costs for semiconductors, food, and fertilizer.
The Strait of Hormuz has been experiencing geopolitical and economic disruption since February 28, 2026, after joint military strikes by the U.S. and Israel on Iran. In response, Iran launched retaliatory missile and drone attacks, and the Islamic Revolutionary Guard Corps (IRGC) issued warnings prohibiting vessel passage, effectively halting shipping traffic. This has been described as the largest disruption to the energy supply since the 1970s energy crisis. The closure affects various sectors, including semiconductors, food, and fertilizer. The disruption has led to increased energy prices, which in turn raise production costs for semiconductor manufacturing, potentially impacting the production of smartphones and advanced defense systems. Additionally, the disruption of fertilizer supplies could create a "domino effect" on crop yields and food availability, potentially driving higher food prices worldwide. Shipping insurance rates have also surged, with war-risk premiums increasing from 0.125% to between 0.2% and 0.4% of the ship insurance value per transit before the strikes. By March 9, 2026, shipping insurance rates had increased by four to six times over the previous week. Some insurers have even temporarily withdrawn cover for Hormuz transits altogether.
