Since the end of February, no tankers carrying vital commodities such as oil, liquefied natural gas (LNG), urea, refined oil products, hydrogen, and helium have passed through the Strait of Hormuz, a critical maritime chokepoint in the Gulf region. This disruption follows a sequence of escalating events beginning with armed conflict, followed by the imposition of a blockade, which has now shifted global markets toward tangible shortages as inventories are depleted.

Industry experts caution that the initial scarcity—previously mostly theoretical—has now become a reality, necessitating strategies to manage constrained supplies. These measures may include demand suppression achieved through a combination of rationing or an economic downturn, potentially driven by rising prices and tighter monetary policy. The prolonged closure of the strait and the extent of physical damage to infrastructure will largely dictate the duration and severity of shortages.

According to Nick Butler, former group vice-president for strategy and policy development at BP and currently at King’s College London, the situation extends beyond the blockade itself. Iran’s targeting of key infrastructure has resulted in significant damage, incapacitating at least eight major Gulf refineries and Qatar’s Ras Laffan LNG facility. The timeline for repairs remains uncertain.

Shortages are not confined to crude oil but disproportionately affect select refined products. Refining facilities are specialized for specific types of crude, which complicates substitution. Prior to the crisis, the Gulf region was exporting roughly 3.3 million barrels per day of refined products—including diesel, jet fuel, gasoline, and naphtha—and 1.5 million barrels per day of liquefied petroleum gas (LPG) to Asian and European markets. The absence of these exports disrupts vital supply chains, with jet fuel and diesel among the most acutely affected. Despite being a net exporter, the U.S. remains dependent on particular crudes suitable for its refining infrastructure, highlighting an ongoing interdependence.

So far, the impact has been softened by a rapid drawdown of global stockpiles, which, however, are finite. Increasing production outside the Gulf or rerouting shipments around the Strait of Hormuz is constrained by existing pipeline capacities and refinery availability. Much of the world’s spare production lies within the Gulf, with Russia as the next largest alternative producer. Yet Russian capacity remains limited, complicated by political factors and logistical bottlenecks. Expanding pipeline capacity, such as those from Saudi Arabia to the Red Sea or Oman to Ras Markaz, would require considerable time and investment. Europe faces additional challenges with a decline in refining capacity over recent years, limiting swift adjustments.

The crisis extends beyond energy commodities, affecting global supplies of helium, naphtha, methanol, phosphates, urea, ammonia, and sulfur. A reduction in helium availability threatens microchip manufacturing, while shortages of fertilizer components could undermine global food production. Longer shipping routes add cost pressures to global trade, and approximately 20,000 seafarers remain stranded in the Gulf due to the ongoing conflict.

Market sentiment currently reflects optimism for a near-term ceasefire and reopening of the strait, with futures prices suggesting eventual stabilization. However, analysts stress that futures curves are not reliable predictors of supply disruptions, pointing to frequent historical inaccuracies. Political complexities further cloud the outlook. Former U.S. President Donald Trump’s stated priority is preventing Iran from acquiring nuclear weapons, with little regard for associated economic consequences. Whether Iran would negotiate or trust U.S. commitments remains uncertain. Iran’s control of Gulf shipping also offers it leverage, including potential demands for passage fees.

If disruptions persist, energy prices could escalate sharply given the inelastic demand for these essential commodities. Rising costs may fuel inflationary pressures, prompting higher interest rates and triggering a global recession. Fatih Birol, executive director of the International Energy Agency, has warned of an unfolding energy crisis on an unprecedented scale. Analysts caution that without resolution, current disruptions could mark the beginning of a protracted period of supply challenges with widespread economic repercussions.