Oil prices continue soaring as Hormuz closure threatens global energy collapse

The world is grappling with one of the largest oil supply shocks in recent history as the Strait of Hormuz remains effectively closed by Iran following retaliatory strikes against Israel-US attacks launched on February 28.

The narrow but strategic waterway, which channels roughly one-fifth of the world’s oil and liquefied natural gas (LNG), has seen tanker volume plummet to less than 10 percent of its pre-war levels.

The bottleneck is fueling a surge in global energy costs, sending oil prices skyrocketing as markets react to the supply chain volatility.

Brent crude hovers around $105 per barrel, down from earlier highs near $120 during the peak of the crisis, the highest level since 2022.

The closure removes an estimated 20 million barrels per day from global markets.

In response, the International Energy Agency has decided to release 400 million barrels from strategic reserves, enough for only about four days of global demand.

Despite the widespread regional instability triggered by the ongoing conflict, Tehran has managed to keep its energy trade flowing.

Iran has not only maintained its crude oil exports through the Strait of Hormuz but has even seen periods of increased volume since the war broke out.

Iranian oil flows remained robust through early March, with daily exports averaging at least 2 million barrels.

Total volume for the first 11 days of the month is estimated between 13.7 million and 16.5 million barrels.

To damage Tehran’s oil export capacity — mostly to China — the US conducted strikes on Iran’s critical Kharg Island oil hub, raising global oil prices once again.

Asian nations are hit hardest

China, the world’s top crude importer, sees over 40 percent of its oil and 30 percent of LNG shipments blocked, with more than 50 vessels trapped.

To manage the crisis, Beijing has stockpiled fuel, sought safe passage from Iran and ban fuel exports to manage shortages.

India, reliant on 70 percent of its oil imports and over half its LNG from the Gulf, faces pressure on the rupee and rising inflation.

India’s daily crude oil consumption stands at 5.5 million barrels.

US has allowed India to buy Russian oil for 30 days in an effort to keep global supplies flowing and temper further price increases.

Japan and South Korea, sourcing 75 percent and 70 percent of their oil from the Middle East, have reserves that could last just few weeks.

Petrol stations in South Korea have reported a 20 percent increase, while the authorities announced that petrol prices will be capped.

Other countries, including Thailand and Bangladesh, are dealing with acute fuel shortages, power cuts and industrial slowdowns.

Europe, Africa fuel shortages

Europe faces rising energy costs and inflation, exacerbated by Gulf refinery shutdowns, though more diversified energy sources partially cushion the blow.

The Strait’s disruption is not only hitting crude oil supplies but also curbing fuel shipments.

Gulf refineries are struggling to move the fuel they produce, including Kuwait’s giant 615,000-bpd Al Zour refinery, a major source of jet fuel for Europe and Africa.

The Gulf producers, including Saudi Arabia, Iraq, Kuwait and the UAE, have cut production and declared force majeure at key refineries and terminals, further reducing exports.

The US, a relatively small importer of Gulf oil, is facing rising gasoline and energy costs.

In response, the Donald Trump administration has tapped the Strategic Petroleum Reserve, releasing 172 million barrels of oil as part of emergency measures.

Global shipping costs, insurance and supply chain disruptions are also surging, affecting commodities, metals and goods beyond energy markets.