The Strait of Hormuz, a critical waterway through which approximately 20% of the world's crude oil and liquefied natural gas (LNG) passes, has experienced a near-total cessation of shipping traffic since February 28, 2026. This disruption was initiated by Israeli and US attacks on Iran, followed by Iranian threats and attacks on between 10 and 17 vessels, driving war-risk insurance premiums up by over 1,000% and causing some insurers to withdraw coverage entirely. The crisis has created the largest oil supply disruption in history.
Economically, the impact has been severe. Brent crude prices surged from roughly $70 per barrel pre-crisis to over $120, settling around $98 by late May, still 40-45% above pre-conflict levels. Gas prices in the U.S. climbed to $4.06 per gallon, an increase of over $1, with gasoline and diesel prices rising approximately 45% and 48% respectively. The Consumer Price Index hit 3.8% year-over-year in April, with the Dallas Fed estimating the conflict added 0.8 to 1.2 percentage points to headline inflation. These price shocks could trigger a global recession if prolonged, affecting raw materials, electricity, and manufactured goods for up to 18 months.
Shipping through the strait, which saw 178 ships daily before the conflict, has plummeted to single-digit transits, representing a 95% drop. Rerouting adds 10 to 14 days per voyage and approximately $1 million in additional fuel costs per ship. The crisis has highlighted the vulnerability of global supply chains, demonstrating that even unreliability, rather than outright closure, is enough to cause widespread disruption. This situation has led to calls for re-prioritizing energy security over energy transition, with some policymakers possibly reconsidering "quit oil" policies in favor of expanding oil storage and diversifying delivery paths.
