Global Oil Supply Shock: The Impact of the Strait of Hormuz Conflict

The ongoing conflict involving Iran, the United States, and Israel has led to significant disruptions in global oil supplies, particularly through the Strait of Hormuz, a crucial maritime chokepoint responsible for approximately one-fifth of the world's daily oil consumption. As tensions escalate, oil prices have surged, raising concerns reminiscent of the oil crises of the 1970s.

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The 1970s experienced two major oil crises that serve as historical parallels to the current situation. The first crisis occurred during the 1973-74 Yom Kippur War, when Arab oil producers imposed an embargo, cutting global supply by 4 to 5 million barrels per day and quadrupling oil prices. The second crisis, from 1979 to 1980, was triggered by the Iranian Revolution and the Iran-Iraq War, which similarly disrupted oil flows and led to a doubling of prices. Both crises resulted in severe stagflation, characterized by high inflation and stagnant economic growth.

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As of late March 2026, Brent crude prices have risen significantly, exceeding $115 per barrel. The closure of the Strait of Hormuz has led to a stark difference between "paper" prices, which reflect financial market trading, and "physical" prices for actual oil delivery. For instance, while Brent crude futures rose by 36% since the onset of the conflict, physical delivery prices in Asia surged by 76%. This disparity highlights the complexities of the current market, where geopolitical tensions are driving real-world supply issues.

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The ramifications of the conflict extend beyond oil, affecting prices for liquefied natural gas (LNG) and other commodities. LNG prices in Japan and South Korea have increased by 48%, while jet fuel costs are also rising. Analysts warn that without intervention, these trends could exacerbate global inflation and hinder economic growth.

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Critics argue that the U.S. and Israeli military actions against Iran could further destabilize the region and worsen the energy crisis. Experts caution that if Iranian proxies, such as the Houthis, escalate their involvement by targeting the Bab el-Mandeb Strait, another vital shipping route, oil prices could soar to $150 per barrel. This potential escalation underscores the precarious nature of the current geopolitical landscape.

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Chevron CEO Mike Wirth emphasized the tangible effects of the Strait of Hormuz closure on global markets, while Shell CEO Wael Sawan noted the ripple effects spreading from South Asia to Europe. White House spokesperson Karoline Leavitt indicated that negotiations with Iran are ongoing but warned of severe consequences if talks fail.

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There are discrepancies regarding the extent of the crisis's impact. While some sources indicate that the U.S. and allies are experiencing significant supply disruptions, others suggest that the situation remains manageable for certain countries, such as the UK, which claims to have adequate diesel supplies.

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As the situation develops, further military actions or negotiations could significantly alter the landscape of global energy supplies. The international community is closely monitoring the potential for escalation, particularly regarding the Bab el-Mandeb Strait, which could become a focal point for further conflict.

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• “There are very real, physical manifestations of the closure of the Strait of Hormuz that are working their way around the world,” — Mike Wirth, CEO of Chevron

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• “If the war escalates, we should expect them to get involved and resume their maritime campaign,” — Noam Raydan, Washington Institute for Near East Policy

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• “But the reality of the physical market disruption is really hard to ignore.” — Ben Cahill, Center for Energy and Environmental Systems Analysis

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The ongoing conflict in the Strait of Hormuz represents a critical juncture for global energy markets, with potential repercussions that could echo the oil crises of the past.

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