Oil prices swing as Iran war tensions leave Strait of Hormuz effectively closed

The Strait of Hormuz is becoming increasingly difficult to traverse as the Iran war escalates, and crude oil prices have been swinging as the disruption affects global energy shipments, according to reporting that cites the International Energy Agency and shipping data.

On a typical day, ships carrying about a fifth of the world’s oil sail out of the Persian Gulf through the narrow Strait of Hormuz. But the war with Iran is effectively closing the route, hemming in more than 90% of crude and refined products, the report said, citing the International Energy Agency. The Islamic Republic has vowed to block the region’s oil exports, saying it would not allow “even a single liter” to be shipped to its enemies.

The pressure has been reflected in markets, with oil prices hovering around $100 per barrel, the report said. Analysts said the disruption could also feed into painful inflation for the global economy if the blockage lasts a long time, and some energy analysts believed oil prices could jump to $150 per barrel if the strait remains closed for weeks and conditions worsen.

Hakan Kaya, a senior portfolio manager at investment management firm Neuberger Berman, said, “The scale of what is at stake cannot be overstated.” In a separate development, President Donald Trump posted on social media Saturday that, “One way or the other, we will soon get the Hormuz Strait OPEN, SAFE, and FREE!”

What the waterway is and why it matters

The Strait of Hormuz is a bending waterway about 33 kilometers (21 miles) wide at its narrowest point, connecting the Persian Gulf to the Gulf of Oman. While Iran and Oman control their territorial waters in the strait, it is generally viewed as an international waterway that ships can navigate.

The report noted that the waterway sits near the UAE, home to Dubai. It has long been important for trade, and in the modern era it is the route for supertankers carrying oil and gas from Saudi Arabia, Kuwait, Iraq, Qatar, Bahrain, the UAE and Iran. The vast majority of the route’s shipments go to markets in Asia, including China, and while there are pipelines in Saudi Arabia and the UAE that can avoid the passage, the U.S. Energy Information Administration said most volumes that transit the strait have no alternative means of exiting the region.

Incidents, partial traffic, and efforts to keep shipping moving

As tensions have mounted, the report said the United Kingdom Maritime Trade Operations center, run by the British military, had received 21 reports of incidents affecting vessels in and around the Persian Gulf, Strait of Hormuz and Gulf of Oman as of Tuesday. It said the list included 16 attacks and five other items marked as “suspicious activity,” involving tankers, tugs, cargo and other vessels.

Even with the route described as effectively shut, the report said some traffic continued. It cited maritime data firm Lloyd’s List Intelligence saying that at least 89 ships crossed the Strait of Hormuz between March 1 and 15, including 16 oil tankers. Lloyd’s List Intelligence also said the figure was down from roughly 100 to 135 vessel passages per day before the war, and it reported that more than one-fifth of the vessels were believed to be Iran-affiliated, with Chinese- and Greece-affiliated ships among the rest.

The report said Iran had previously temporarily shut down parts of the strait in mid-February for what it said was a military drill. It also said Iran had not carried out repeated threats to close the waterway altogether since the 1980s Iran-Iraq war, when both sides attacked tankers and other vessels and used naval mines.

Reinsurance, insurance pressure, and possible escort plans

The report said the U.S. is rolling out ship reinsurance in the region through the U.S. International Development Finance Corp. to help get ships moving through the strait again. It described political risk insurance as coverage intended to protect firms against financial losses tied to unstable political conditions, government actions or violence, noting that marine insurers had been canceling or raising rates for insurance in the region.

The report said the U.S. reinsurance facility will insure losses up to approximately $20 billion on a rolling basis, according to the International Development Finance Corp., and that it would focus first on insuring cargo and physical damage to a ship’s structure and operating machinery. It said Trump has stated that, if necessary, the U.S. Navy would escort oil tankers through the strait, though it had not yet happened.

It also described a market-moving episode in which Trump’s Energy Secretary Chris Wright briefly posted on social media that the U.S. Navy had escorted a tanker through the strait, then deleted the post after the claim was false. The report said the reversal helped send oil prices and stock markets swinging sharply.

U.S. moves to boost supplies

In addition to insurance and shipping-risk steps, the report said global shippers issued service alerts and suspended operations in the area. It quoted Tom Goldsby, logistics chairman in the Supply Chain Management Department at the University of Tennessee, saying, “Those ships that got stuck in the Gulf are not going anywhere,” and said other ships were anchored or going elsewhere.

The report said the White House on Wednesday announced two moves to boost supplies: a 60-day waiver of Jones Act requirements, and permission for U.S. companies to do business with Venezuela’s state-owned oil and gas company PDVSA after the Treasury Department eased sanctions with limitations. The report said the Treasury issued a broad authorization allowing PDVSA to directly sell Venezuelan oil to U.S. companies and on global markets.

It also said the International Energy Agency would make 400 million barrels of oil available from its members’ emergency reserves—described as the largest such move in its history and more than double the 182.7 million barrels released in 2022 in response to Russia’s full-scale invasion of Ukraine. The report cautioned that while emergency releases could replenish some supply in the short term, a longer-term fix would depend on the strait clearing.