Strait of Hormuz Blockade: Global Economic and Energy Impact

The effective closure of the Strait of Hormuz following the outbreak of military conflict on February 28, 2026, has disrupted global energy flows and caused a severe economic strain on international trade, prices and finance.

The disruption began after the United States and Israel attacked Iran on February 28, 2026. This led to the blockage of the strait, a critical corridor that connects the Gulf with the Arabian Sea and serves as a primary artery for global energy trade.

Collapse of Maritime Traffic

Ship transits through the Strait of Hormuz have seen a near-total collapse. According to a rapid assessment by UN Trade and Development (UNCTAD), daily transits dropped from approximately 130 in February to only 6 in March, representing a decline of about 95%.

The closure has had immediate consequences for global production, trade, and consumption. The impact extends beyond energy markets, spilling over into air cargo, port logistics, and broader maritime transport systems.

Energy Market Disruptions

The Strait of Hormuz typically handles about 20% of the world’s oil and liquefied natural gas (LNG). In 2025, estimates from the US Energy Information Administration (EIA) indicated that approximately 20 million barrels of oil and oil products passed through the strait daily, totaling nearly $600 billion in annual energy trade.

The oil transported through the corridor originates from several Gulf states, including Iran, Iraq, Kuwait, Qatar, Saudi Arabia, and the United Arab Emirates (UAE).

LNG shipments have been similarly affected, as about 20% of global LNG is shipped through the strait. In 2024, Qatar exported approximately 9.3 billion cubic feet per day (Bcf/d) and the UAE exported about 0.7 Bcf/d through the corridor.

Impact on Global Industry and Supply Chains

The blockage has halted the transport of naphtha and other raw materials essential for the energy and petrochemical industries, delivering a critical blow to the global economy.

Fuel prices rose sharply following the escalation on February 28 and remain elevated. These increases, combined with significantly higher costs for transporting oil, are feeding through supply chains and raising the cost of producing and moving goods worldwide.

The disruption also affects the global agricultural sector. Approximately one-third of the world’s fertilizer trade normally passes through the strait, utilizing natural gas heavily in the production process.

Economic Consequences for Producers and Consumers

For oil producers in the Gulf, the closure has forced a curtailment of production. Because local oil storage has limited capacity, producers must shut in oil wells if the product cannot be exported. Producers in Iraq and Kuwait began curtailing production in early March 2026.

A complete cessation of exports from the Gulf region removes nearly 20% of global oil supplies from the market, with approximately 80% of that volume typically destined for Asia.

While container and dry bulk shipping are more insulated than oil and LNG carriers, they are still experiencing rising costs and disruptions. UNCTAD warns that the financial pressure is increasing particularly for developing countries.

The initial closure was driven partly by the necessity to adjust insurance contracts for oil tankers, but the primary concern remains the risk of attacks on shipping causing shipwrecks or unsustainable losses within the shipping lanes.