Executive Summary
Iranian forces closed the Strait of Hormuz, and major aviation hubs in the UAE went offline following US-Israeli military attacks against Tehran.
This blockade removes 20 million barrels of oil per day from global markets, threatening the energy security of major Asian and European economies. A 20% reduction in global liquefied natural gas (LNG) supplies heightens the likelihood of industrial stagnation and internal energy deficits.
Decision-makers and investors need to tackle the sudden breakdown of regional logistics and the halt in trade via the major sea route connecting the Middle East and the Indo-Pacific.
Key Findings
- Global energy supply faces an immediate deficit of 20 million barrels of oil per day, representing one-fifth of global consumption as of early 2026.
- Maritime insurance premiums for the Persian Gulf are rising by 50%, with major providers issuingcancellation notices for war risk coverageeffective March 5, 2026.
- The suspension of operations at Dubai International Airport disrupts the transit of2 million annual passengers, severing the primary logistics link between Western and Asian markets.
Background Information
The Strait of Hormuz functions as the most significantmaritime oil chokepoint globally, facilitating the movement of approximately20% of the world’s petroleum liquids. Throughout 2024, an average of20 million barrelspassed through this channel each day, a figure that held steady into early 2025. Beyond crude oil, the strait handles20% of the global liquefied natural gas trade, primarily originating fromQatar’s North Field.
TheInternational Energy Agency(IEA) estimated global oil demand at 104.87 million barrels per day in February 2026. Asian economies, specificallyChina, India, Japan, and South Korea, receive over 80% of the crude oil transiting the strait. In 2025, China’s crude oil imports hit an all-time high of11.6 million barrels daily, and Middle Eastern countries supplied a significant amount of this.
Alternative transit options remain limited compared to the total volume moved by sea. The East-West pipeline inSaudi Arabiahas a daily capacity of 7 million barrels. In addition, theUnited Arab Emiratestransports 1.5 million barrels of oil daily toFujairahvia theAbu Dhabi Crude Oil Pipeline. The combined capacity of these routes accounts for less than 40% of the overall regional export traffic, thus leaving the bulk of Gulf output constrained by Iran’s blockade.
Aviation activityin the region supports global passenger and cargo movements through high-capacity hubs.Dubai International Airporthandled 95.2 million passengers in 2025, serving as a critical connection point for 108 international airlines and 291 destinations. The closure ofGulf Cooperation Council (GCC)infrastructure, resulting fromIranian retaliatory strikes, is indefinite and has interrupted the transit of valuable commodities and personnel.
Why Does It Matter?
The removal of 20 million barrels of daily supply triggers an immediatesurge in Brent crude prices. If the blockade continues past the initial 72 hours, markets expect that prices per barrel will exceed $100. Higher energy costs will increase the price of refined fuels, affecting the transportation and logistics sectors globally.
China faces a significant threat to its manufacturing sector.The Strait of Hormuz transports approximately 50% of China’s oil imports. Disruptions to these supplies jeopardise industrial output and national power grids, which could cause a GDP decline this fiscal year.
GCC member states rely on oil and gas exports for 30% to 90% of government revenue. The delay in product commercialisation obstructs the influx of funds necessary for governmental budgets and infrastructure development. Sustained stagnation in exports may cause domestic financial instability in these monarchies.
Shipping companies are rerouting vessels away from the Persian Gulf and the Suez Canal. Routing vessels via the Cape of Good Hope results in an increase of ten to fifteen days in transit times for shipments between Asia and Europe. This change increases fuel consumption and operational costs for the global merchant fleet.
A 50% escalation in maritime insurancecosts renders regional shipping operations financially unsustainable for a significant number of carriers. Prominent insurance providers stopped offering war risk coverage. Therefore, tankers must remain at anchor or seek alternative transit routes outside the operational area.Higher insurance costs contribute to the rising price of consumer goods in import-dependent regions.
Europe loses access to a primary source of LNG at a time of high seasonal demand. With Qatari gas shipments through Hormuz suspended, European utility companies face the necessity of procuring expensive spot-market alternatives from the United States or Africa. This supply gap threatens to raise household utility bills and operational costs for heavy industry.
The closure of UAE and Qatari airspace severs the world’s most efficient aviation corridor. Freight carriers must adopt extended routes across Central Asia or Africa, augmenting the expense of air-transported electronics and pharmaceuticals. This disruption affects the timing of global manufacturing schedules that depend on just-in-time delivery.
Regional powers are redirecting capital toward immediate military and defensive needs. The necessity for prompt restoration and the stationing of advanced missile defence systems arises from strikes conducted against civilian desalination and power facilities. These expenditures drain resources previously allocated for long-term economic diversification.
Global central banks face the challenge of managing energy-driveninflation. Sustained elevated oil prices may necessitate modifications to interest rates to mitigate inflationary pressures, leading to a more widespread economic deceleration. International investors and currency markets are experiencing a period ofheightened volatilitybecause of the current economic climate.
The crisis provides an incentive for states to reduce their reliance on Middle Eastern fossil fuels. A surge ininvestment in national nuclear facilities, renewable energy technologies, and localised pipeline infrastructureis probable as countries endeavour to diminish the potential threats originating from critical maritime transit points. This shift will alter the structure of international energy trade over the next decade.
Indicators to Monitor
- Changes in the occupancy of the global Strategic Petroleum Reserve (SPR) by IEA member states to compensate for the 20-million-barrel daily deficit.
- Iranian naval activity and mine-laying vessels within the 21-mile navigable width of the Strait of Hormuz.
- The volume of crude oil successfully diverted through the Saudi East-West and Abu Dhabi-Fujairah pipelines to Red Sea and Gulf of Oman terminals.
- Resumption or continued suspension of flight schedules by Emirates and Qatar Airways at their respective home hubs.
- A continuous military conflict involving US-Israeli forces and Iran, possibly including the GCC military.
So What?
Short-term scenariosinvolve a severe global energy shock and the declaration of force majeure by major Gulf oil producers. A failure to re-establish access through the Strait of Hormuz within the designated 14-day timeframe will cause a marked contraction of industrial output throughout Asia and a precipitous increase in the cost of worldwide maritime transport. Stakeholders shouldactivate contingency logistics plans and secure alternative energy supplies to maintain operational continuity.
Potentiallong-term consequencesresulting from the maritime blockade of the Strait of Hormuz involve a lasting re-evaluation of the Persian Gulf’s reliability as an energy supplier. The ongoing conflict highlights the importance of geographically diversified supply chains and decentralised energy production. For multinational enterprises, strategic recommendations involve elevating stock quantities and diminishing dependence on single transit conduits for essential parts.
