Hormuz: why this is much more than a fuel-price shock

This is the first of two blogs looking at the impact and importance of the closure of the Strait of Hormuz.  Part 1 is an overview of the issue and its potential geopolitical importance.  Part 2 will look at the potential implications in additional detail.

The closure of the Strait of Hormuz places the world at risk of a major global economic and geopolitical shock. The closure is not merely an “oil shock”, affecting the global supply of oil and natural gas.  It is already having an impact on many other supply chains, including refined petroleum products, fertilisers, food, plastics, metals and other gases.  It is also affecting shipping, and aviation, thus posing a threat not only to economic stability, but also public services, and confidence in governments.  

If the closure continues, it is entirely possible that what is currently an energy and supply chain shock might develop into a challenge to geopolitical and economic resilience.

The Strait of Hormuz is one of the central chokepoints in the global economy. The International Energy Agency says that around five million barrels per day of oil products were exported through the Strait in 2025, in addition to crude flows. LNG moving through the Strait accounted for almost one-fifth of global LNG trade.  Before the start of “Operation Epic Fury”, between 100-150 ships a day passed through the Strait. Currently the daily figure is around five or six.

The current disruption cannot be solved simply by “turning the taps back on” when the conflict eventually ends. Wars damage the unglamorous infrastructure on which energy systems depend: terminals, pipes, power supplies, loading equipment, storage tanks, refineries, control systems, ports, insurance arrangements, and the confidence of shipping operators.  The full extent of that damage is still unknown. In the best case, Gulf flows take weeks to normalise. More plausibly, recovery takes months, even if active fighting and blockades stop quickly. In the worst case, disruption could last a year or more. That recovery uncertainty is now part of the price.

There is currently no sign of the Strait reopening. The Government of Iran has just announced the creation of the Persian Gulf Straits Authority (PGSA, which will require all ships wishing to pass through the Strait to provide it with detailed information about their ownership, route, destination, cargo, crew, insurance etc, and to pay a levy of $2 million.  In the context of the conflict, it is not clear as yet, how the USA will respond to what would amount to an annexation of the Strait. Nor is it clear how the UN and the International Maritime Organization will respond to what certainly seems to be a breach of maritime law.

The issue is not only an oil shock.  The closure also affects many other commodities.  One example is the noble gas, helium.  Richard David Hames notes that helium is one of the few irreplaceable inputs in the manufacture of semiconductors, and therefore a critical factor in the development of AI. Qatar’s Ras Laffan gas complex produces about one third of the global supply of helium, and is one of only two places currently able to produce the purest helium, which is required for making premium semiconductors.  Both South Korean and Chinese manufacturers rely heavily on it.

The Ras Laffan complex was damaged by air strikes in February 2026, which caused an immediate halt to production.  Repairing the damage may take years rather than weeks or months.  The closure of the Strait means that shipping lanes are effectively blocked regardless. 

The example of helium illustrates very well how this closure affects critical sectors beyond fuel.  It illustrates why the crisis is so important:

• A local/regional conflict is already having consequences for global trade: in the case of helium, delays in the production and export of helium will cause delays in the development of AI, in which the governments and businesses have committed billions of US dollars.

• The global trading system has evolved on the basis of certain assumptions: free movement of shipping, with a minimum of geopolitical hindrances  such as piracy. The closure of the Strait calls into question whether these assumptions still hold.

• The global trading system has operated on the basis of long supply chains and short lead times for supply and resupply.  The end of the New World Order and the US Government’s use of tariffs has already called this into question.  The crisis in the Strait amplifies the damage.

Alongside geopolitics, a prolonged closure of the Strait will have consequences for businesses, and governments.  Rising costs of fuel will lead to rising prices more generally.  Shortages of fuel will provoke panic buying and hoarding. Deliveries will become more expensive.

Governments will face pressure to maintain as much continuity and stability as possible. Can food still move? Can ambulances, care workers, police, fire services, refuse services, and local authority contractors keep operating? Can farmers get diesel? Can ports, airports, logistics depots, water companies, telecoms providers, and hospitals maintain supply? Without those, public dissatisfaction will increase rapidly, and governments will take most of the blame.

The west has not known significant food shortages since the aftermath of WWII.  But the global food system is highly dependent on energy at every stage: diesel for tractors and lorries, gas for fertiliser, electricity for refrigeration, oil-derived plastics for packaging, fuel for fishing vessels, shipping for imports, and road haulage for distribution.  Fertiliser is less visible but potentially a more consequential part of the story. Nitrogen fertiliser is mainly linked to natural gas rather than oil, but a Gulf crisis affects both. LNG disruption raises gas prices. Higher gas prices raise fertiliser costs. Oil and shipping disruption raise the cost of moving fertiliser and farm inputs.

The chain of connections and potential consequences continues; we will consider this further in Part 2.  Oil is also a feedstock: it is used to make packaging films, synthetic rubber, adhesives, resins, solvents, lubricants, bitumen, insulation foams, paints, coatings, medical disposables, cable insulation, vehicle components, and specialist industrial materials among others.

A sustained closure of the Strait would be inflationary, in a most awkward way because it would push up the price of essentials without making people richer. It would squeeze households, raise business costs, and force governments to choose between support, restraint, and borrowing.  Central Banks cannot raise interest rates to produce diesel, fertiliser, jet fuel, or packaging resin.

Governments around the world realise the gravity of the problems their countries face.  The absence of a resolution to the closure will cause the economic damage to increase.  In a speech this week, Indian Prime Minister Narendra Modi warned of the impact of global conflict and fuel crises.  He said that If these situations were not rapidly changed, “achievements of the past many decades would be washed away, and a huge section of the world's population would be pushed back into poverty”.

The strategic lesson

In Part 2, we shall look at some specific areas affected by the closure of the Strait.  Here, we have seen how large parts of the world including the UK, remain deeply dependent on hydrocarbon continuity. Decarbonisation has begun, but the world still runs on diesel logistics, aviation fuel, gas-linked fertiliser, oil-derived materials, and global shipping.

That does not weaken the case for net zero: it strengthens the case for doing it strategically and properly. Electrified transport, reliable buses, rail freight, heat pumps, grid resilience, including enhanced grid capacity and distribution, local energy storage, domestic nutrient recycling, efficient logistics, and reduced waste are climate policies. More importantly, they are national resilience policies. But if the transition is experienced as crisis management, or something only the affluent can afford, there is a high risk it will fail politically.

The uncomfortable truth is that the Strait of Hormuz crisis has exposed the gap between the economy we would like to have, and the one we currently depend on. We have digital services, financial sophistication, advanced universities, clever supply chains, and ambitious climate targets. We also have food moved by diesel, flights powered by jet fuel, farms dependent on fertiliser and diesel, homes heated by oil and gas, and essential goods wrapped in petrochemicals.

The danger is not that everything stops. It is that enough things become expensive, delayed, prioritised, or uncertain at the same time that life feels less normal. In the process, social division increases, and public trust in political systems and processes falls further.

Written by David Lye, SAMI Fellow, Patricia Lustig, SAMI Principal, Jonathan Blanchard Smith, SAMI Director & Fellow

The views expressed are those of the author(s) and not necessarily of SAMI Consulting.

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