Iran Blocks Strait of Hormuz

The Strait of Hormuz has been effectively blocked by Iran, causing a significant disruption in global oil and gas trade. This narrow waterway connects the Persian Gulf to the Arabian Sea and is responsible for about 20% of the world's oil and liquefied natural gas (LNG) supplies.

The blockade has led to a halt in tanker traffic and production stoppages in major producing countries like Saudi Arabia, Qatar, and Iraq. The disruption has caused oil prices to surge, with Brent crude reaching its highest level since 2024 before dropping below $90 after President Trump said the war could end “very soon”. European gas prices have also seen significant increases due to the closure of Qatar's LNG facilities.

The Iranian Revolutionary Guard Corps has issued warnings that any vessel attempting to pass through the strait will be set ablaze. This has led to a surge in insurance costs and a halt in shipping operations by major companies like Maersk and CMA CGM. The U.S. has offered political risk insurance and naval escorts for tankers, but the effectiveness of these measures remains uncertain.

Only two vessels not linked to Iran or Russia have made the journey through the strait since President Trump announced emergency measures on Friday. One of those that braved the journey switched off its transponder, and a second signalled it was Chinese-owned and crewed. Other ships may have passed through by turning off their transponders and using tactics to conceal their movements.

The blockade also impacts other sectors beyond hydrocarbons, including fertilizers, plastics, and food imports. Shipping routes are being extended, leading to increased costs and delays in global trade. The economic fallout from the disruption could lead to higher inflation and interest rates worldwide. Jet fuel prices have surged due to supply disruptions and market anxiety.

According to news.sky.com, Iran has employed a variety of tactics to maintain the blockade, including the use of sea drones, mines laid by midget submarines, and GPS jamming. At least 16 ships have been hit by Iran since the conflict began, with Tehran releasing videos of attacks on oil tankers. The International Maritime Organisation reports that around 3,000 ships and 20,000 crew are trapped or affected in the region.

eNCA.com reports that Iran has warned of a long war of attrition that would 'destroy' the world economy. Iran's Revolutionary Guard vowed to target 'economic centres and banks' linked to US and Israeli interests. The International Energy Agency announced a record release of 400 million barrels of oil reserves by its members in an effort to stabilize prices.

On Wednesday, Tehran warned that it “will never allow even a single liter of oil to pass through the Strait of Hormuz.” Hours earlier, Iranian drones slammed into oil storage facilities at Oman’s Salalah port. Oman suspended terminal operations at the port indefinitely; oil spiked over $100 a barrel (nypost.com).

Since the start of Operation Epic Fury, the Islamic Republic has launched hundreds of strikes against targets across the region, disrupting oil and gas facilities in Qatar, Kuwait, and Saudi Arabia. Bahrain’s national oil company declared force majeure after an Iranian strike sent its main refinery ablaze (nypost.com).

The United Arab Emirates suspended operations at its largest oil refinery the next day. The effects of Iranian strikes on energy facilities continue to ripple around the globe. In Europe, gas prices spiked as much as 50% and gasoline prices by nearly 30% during the war’s first week (nypost.com).

Americans are also feeling it at the pump: By Thursday, the average price of gas in the US hovered around $3.60 — up more than 20% from last month (nypost.com). Prolonged disruptions to Gulf energy shipments, particularly Qatari liquified natural gas (or LNG), could hit Asia hardest. More than 80% of Qatari LNG is destined for Asian markets, including China, South Korea, and India.

Qatar’s national energy company suspended LNG production on March 2 and formally declared force majeure on March 4 (nypost.com). Taiwan has reportedly started to look for alternative suppliers. The International Energy Agency agreed on Wednesday to release a combined 400 million barrels of oil “from their respective reserves.” Washington will pitch in 172 million barrels.

As the conflict intensifies, India faces significant economic challenges due to its reliance on Middle Eastern energy and remittances from its large expatriate workforce. More than 80% of India's gas and up to 60% of its oil pass through the Strait of Hormuz (aljazeera.com). The blockade has led to panic buying of cooking gas, with hotels and restaurants considering closure due to supply fears.

India is home to 9.1 million citizens working in Gulf Cooperation Council countries, sending approximately $50bn in annual remittances back home. A prolonged conflict could disrupt these remittances and impact India's economic growth (aljazeera.com). The Indian government has set up emergency measures and helplines to assist its nationals in the region.

The physical safety of Indian workers is also a concern, with several casualties reported among Asian workers in Iranian attacks. Evacuating such a large expatriate population poses significant logistical challenges for India (aljazeera.com).