Strait of Hormuz at a Standstill
The Strait of Hormuz, a chokepoint for 20% of the world's oil, has been "near-stagnant" for a full week due to the conflict in Iran. The backlog has ensnared roughly 10% of the global container fleet, creating a massive supply chain disruption. Oil exporters like Iraq and Kuwait are being forced to curtail output as storage tanks fill up.
The standstill is a direct retaliation by Iran's Islamic Revolutionary Guard Corps (IRGC) following joint U.S.-Israeli airstrikes on February 28, 2026, which killed Iran's Supreme Leader, Ali Khamenei. In response, the IRGC declared it would attack any vessel attempting to pass through the strait, targeting at least five commercial ships with drones or missiles within the first 24 hours. Major container lines including Maersk, CMA CGM, and Hapag-Lloyd have suspended all transits through the vital waterway. Daily vessel transits, which averaged over 153 before the conflict, have plummeted to an average of just 13 since March 1. War risk insurance premiums for vessels in the Gulf have surged more than tenfold, with most insurers canceling war risk coverage entirely. The disruption has sent shockwaves through energy markets, with Brent crude oil prices surpassing $100 per barrel for the first time in four years. QatarEnergy has been forced to halt its liquefied natural gas (LNG) production, which accounts for roughly 20% of the global supply, and declare force majeure on some shipments. The economic fallout extends beyond energy, sparking fears of stagflation. Asian stock markets have seen sharp sell-offs, with Japan's Nikkei falling over 6% and South Korea's Kospi dropping more than 7%. Prices for commodities like urea, a key fertilizer, have jumped by approximately 25% as key producers in the region are cut off. Although some limited pipeline infrastructure exists to bypass the strait, it cannot compensate for the massive volume of halted maritime traffic. Saudi Arabia is looking to reroute some exports through its East-West pipeline to the Red Sea port of Yanbu, and has arranged at least one such crude shipment for Pakistan. The closure has trapped 55 Chinese-flagged ships inside the Persian Gulf. Beijing, which relies on the strait for as much as 40% of its oil imports, has urged all parties to keep the trade route open, and has sent naval units to the region for "maritime security" exercises alongside Russia and Iran. The disruption is the largest oil supply shock in history, removing approximately 20 million barrels per day from global markets. This figure dwarfs previous crises; it is nearly four times larger than the supply disruption during the 1990 Iraq-Kuwait War and 4.5 times that of the 1973 Arab oil embargo.
