The Strait of Hormuz crisis that is driving oil past $90 a barrel shows no signs of resolution, and markets are increasingly pricing in the possibility of a prolonged disruption to energy supplies from the Gulf. With the waterway — through which roughly a fifth of the world’s oil and LNG flows — effectively closed to normal commercial traffic, the global energy system is operating under conditions of extreme stress.
Iran’s Revolutionary Guard has threatened to attack any western tanker attempting passage, and the threat has proved credible: nine vessels have been struck since the conflict began. The Trump administration’s offer of military escorts has been met with market skepticism, with most shipping companies and insurers remaining deeply reluctant to send vessels through the strait. Around 600 ships are estimated to be stranded in the Gulf, including 195 oil tankers.
As oil piles up in Gulf storage facilities, producers are being forced to cut output. Kuwait was first, announcing production reductions at fields that had run out of storage capacity. Energy consultants warn that Saudi Arabia and the UAE could face the same problem within 20 days. A coordinated shutdown by those countries would represent an unprecedented disruption to global oil supply — and restarting production after a shutdown typically takes weeks.
Qatar’s parallel LNG crisis has added to the market’s woes. The country, which supplies about 20% of global LNG, has had a key terminal damaged by a drone strike and has warned of weeks or months of disruption. Its energy minister has delivered the most alarming forecast of the week: if the conflict continues, all Gulf exporters could halt production and oil could rise to $150 a barrel. European gas prices have already responded by surging to three-year highs.
Financial markets have priced in the escalating risk. Stock indices fell across Asia, Europe, and the UK, with some recording their worst weeks since the pandemic. Bond yields surged to multi-year highs, rate cut hopes collapsed, and airlines warned of massive losses. Gold fell paradoxically, while the dollar strengthened. The Hormuz crisis, for now, has no clear endpoint — and markets are pricing in the uncertainty accordingly.