On Sunday, a day after U.S. and Israeli forces began raining missiles across Iran, an oil tanker docked off the coast of Oman burst into flames. The same day, maritime tracking organizations announced tankers were targeted by more projectiles in the waters north of the Arabian Peninsula.
Experts say these attacks are opening up a front of the war that could have massive repercussions. A large portion of the world’s energy supply traverses these waters, and for each day attacks happen and fewer ships take the risk of navigating there, the world gets a little bit closer to an economic crisis.
Oman sits at the bottom of the Strait of Hormuz, a key maritime traffic route that links countries in the Persian Gulf, like Iran, to the rest of the world. On normal days, around 20 million barrels of oil, or approximately 20% of the world’s liquid petroleum, passes through the strait, which is less than 30 miles across at its narrowest point. In a moment of regional instability, the seafaring passageway can quickly turn into a strategic chokepoint, and its effects are already rippling out on a global scale.
Renewed conflict in Iran, and the regime’s reprisal attacks across the Middle East, have thrust the strait back to the center of recession fears, as analysts warn that even a partial or prolonged disruption of petroleum supply could shock the world economy into contraction. Now, with the weekend’s attacks, experts are warning that triple-digit crude oil prices could be the least of the world’s concerns. If the strait stays shut down long enough, it could amount to an assured hit for the global economy.
“A prolonged closure of the Strait of Hormuz is a guaranteed global recession,” Bob McNally, founder of consultancy group Rapidan Energy and a former energy advisor to George W. Bush’s White House, told CNBC Saturday.
It’s not just oil. Around one fifth of globally traded liquefied natural gas moved through the Strait of Hormuz in 2024, according to the Energy Information Administration, making it one of the most critical nodes in the world’s energy system. Tanker‑tracking data show that Saudi Arabia alone shipped about 5.5 million barrels per day through the strait in 2024. With about 38% of total crude oil flowing through, the passage is essential for Gulf exporters. While workarounds do exist, including existing pipelines that crisscross their way through the Arabian Peninsula, their limited capacity would struggle to make up for flows that would be lost in a full closure of the strait, leaving the global market particularly susceptible to any sustained disruption.
While the Islamic Republic has yet to forcefully close the strait, the sentiment has already done quite a bit of legwork. On Saturday, the Iranian military warned that passage through the strait was “unsafe,” according to local news reports affiliated with Iran’s Revolutionary Guard. By the end of the day, ship traffic through the strait was down 70% compared with the day prior, the New York Times reported.
Global fallout
A prolonged pause to shipments would shock the global economy. Last summer, after a brief conflict also involving the U.S., Israel, and Iran threatened to shut the strait down, the Oxford Institute for Energy Studies modeled the impact of a potential closure lasting more than a year, finding that 15% of global liquefied natural gas supply would be wiped out, with Europe, China, India, and Japan hit the hardest in terms of lost imports.
Oil prices have skyrocketed as a result of the instability. Brent crude, a global pricing benchmark for most internationally traded crude oil, jumped as much as 13% on Monday to $86 a barrel, and analysts warn that attacks on energy infrastructure in the Gulf or an extended closure could bring it to $100 or higher. The last time oil prices were that high was in 2022, after Russia’s invasion of Ukraine resulted in sweeping international sanctions targeting Russian petroleum exports. Prices have remained below $80 for the past year.
Most banks and analysts frame the possibility of even higher oil prices or a forced closure of the strait as a small risk, for now. Citigroup, for instance, put the chance of a $120 barrel of oil at only 20% in a Monday note. Analysts have also noted the logistical difficulties Iran would face in ordering and maintaining a closure of the strait, including U.S. naval superiority in the region and the risks the regime would run of losing allies by cutting off energy supply. The threat of closure also isn’t new for the Islamic Republic, which has threatened to close the strait multiple times in the past, but never fully followed through.
In an analysis by energy consultancy Wood Mackenzie, researchers noted that the nearest historical analogue would be the 1970s, when an oil supply crisis sparked downturns in several countries around the world. Unlike that period, however, the world is now much less reliant on oil, the analysts noted. To create a similar scale of global economic crisis, they wrote, oil prices would need to reach around $200 a barrel.
Such a cut to global supply, and the accompanying risk to the world economy, would likely be unpalatable even in the U.S., the Wood Mackenzie analysts added.
“A sustained conflict that significantly limits transit via the Strait of Hormuz, elevates oil and LNG prices, and weakens an already fragile global economy presents a considerable political risk for the U.S,” they wrote. “A sharp, negative reaction in global financial markets could prompt the Trump administration to look for an off-ramp and de-escalate.”
