A 50 percent increase in fuel prices is looming: The Strait of Hormuz as a weapon – How the Iran war is severing the arteries of the global economy

Everything comes to a standstill: How the conflict in the Persian Gulf is tearing apart global supply chains

The world's most important waterway is blocked – and the consequences are catastrophic

It is the ultimate worst-case scenario, one that economists, military strategists, and energy analysts have been urgently warning about for decades: With the start of an unprecedented military air campaign by the US and Israel against Iran at the end of February 2026, the most important global energy artery was effectively severed. The Strait of Hormuz, a narrow bottleneck through which normally a fifth of the world's oil supply and gigantic quantities of liquefied natural gas (LNG) flow, has transformed overnight into a highly dangerous combat zone. The immediate consequence is a shock of unprecedented proportions to global trade, which will shake the world economy far beyond the borders of the Middle East.

Within hours of the first missile strike, commercial shipping in the region collapsed dramatically. Major oil companies and the world's leading container shipping lines were forced to immediately suspend transit. Hundreds of ships are stranded or require costly rerouting – at a time when global supply chains are already severely strained by crises in the Red Sea. With the sudden closure of the Strait of Hormuz, the two most important transit routes between Asia and Europe are now simultaneously blocked.

The macroeconomic consequences of this geopolitical escalation can hardly be overstated. While the military hopes for a swift suppression of Iranian resistance, the financial and commodity markets are preparing for a state of emergency. Analysts anticipate a rapid rise in oil prices to well over $100 per barrel, extreme turbulence in the already sensitive European gas market, and exploding freight rates. Consumers and industry face the threat of a new, severe wave of inflation, ranging from drastic price increases at the pump to serious shortages of consumer goods and industrial components. The conflict in the Gulf is no longer merely a military skirmish—it is a historic stress test for our entire globalized economic system.

Twenty percent of the world's oil flows through a strait that is now a battlefield

On the evening of February 27, 2026, Operation Epic Fury began, a military strike whose economic shockwaves will reverberate far beyond the immediate combat zone. When the United States and Israel launched their coordinated air campaign against Iran, a scenario unfolded that economists and energy analysts had discussed for decades as the ultimate worst-case scenario for global energy supplies: the de facto closure of the Strait of Hormuz. The consequences for global trade, international supply chains, and the world economy as a whole are unparalleled in their potential impact on any event in recent economic history.

The anatomy of an escalation

The military confrontation between the US and Iran had been building for weeks. As early as mid-February, Reuters reported that the US military was preparing for potentially weeks-long operations against Iran. The deployment of a second aircraft carrier strike group to the Middle East, accompanied by thousands of additional troops, fighter jets, missile-armed destroyers, and other military capabilities, signaled an escalation level that surpassed anything previously experienced between the two countries.

The last round of negotiations on Iran's nuclear program ended without an agreement on February 27, with both sides far apart on the core issues. By that time, the Pentagon had assembled the largest concentration of American warships and aircraft in the Middle East in decades, including two aircraft carrier strike groups. While Vice President Vance declared that there was no chance the attacks would lead to a protracted war, the reality of the following hours quickly belied this reassurance.

In his video address launching the operation, President Trump comprehensively outlined the war aims: preventing Iran from acquiring nuclear weapons, destroying its missile program, neutralizing the Iranian navy, and protecting American interests from the Axis of Resistance. The openly communicated goal of regime change, underscored by Trump's call for the Iranian people to overthrow their government, left little doubt that this was not a limited punitive action, but a sustained campaign.

The Strait of Hormuz: A bottleneck of the global economy

The Strait of Hormuz is a narrow waterway on Iran's southern border, connecting the Persian Gulf to the Gulf of Oman and thus to the open Indian Ocean. Approximately 20 percent of the world's oil supply and a significant portion of globally traded liquefied natural gas (LNG) pass through this strait. The Gulf region, including Saudi Arabia, Iraq, Iran, the United Arab Emirates, Kuwait, Qatar, Bahrain, and Oman, produces 27 percent of the world's crude oil, of which about three-quarters, or roughly 20 percent of the total global oil supply, is transported through the Strait of Hormuz.

Within hours of the attacks beginning, commercial shipping traffic through the strait collapsed dramatically. Dimitris Ampatzidis, senior analyst at Kpler, the operator of the ship tracking service MarineTraffic, reported a 70 percent drop in ship movements by late evening Iranian time. Numerous ships in the region had turned back, been diverted to other passages, or were adrift in the Gulf of Oman.

Iranian forces warned ships to avoid the strait, declaring transit currently unsafe. Ships in the region received radio messages, allegedly from the Iranian Navy, prohibiting transit through the strait. The U.S. Naval Aviation (MARAD) issued a warning, advising ships to avoid the area if possible. The organization INTERTANKO reported that the U.S. Navy had warned against navigation in its operational areas, which encompass the entire Gulf, the Gulf of Oman, the Arabian Sea, and the Strait of Hormuz, and stated it could not guarantee the safety of neutral or commercial vessels.

The collapse of shipping

The global shipping industry's response was swift and unprecedented. Several major oil companies and leading trading firms immediately halted their shipments of crude oil, fuel, and liquefied natural gas through the Strait of Hormuz. A senior manager at a leading trading company told Reuters that his ships would remain idle for several days.

The disruption in container shipping was no less dramatic. At least 15 container ships turned back, either while entering or leaving the Strait of Hormuz. Most, however, had either stopped or had already been diverted. According to Linerlytica co-founder Hua Joo Tan, around 170 container ships with a total capacity of approximately 450,000 TEU, representing 1.4 percent of the global fleet, were trapped within the strait and faced restrictions on leaving.

The two major shipping companies, Hapag-Lloyd and CMA CGM, the world's third-largest container shipping company, announced formal suspensions of their operations. CMA CGM ordered all ships in or en route to the Persian Gulf to seek immediate shelter and suspended all Suez transits until further notice. Hapag-Lloyd announced the suspension of all shipping passages through the Strait of Hormuz, citing the official closure by the relevant authorities amid the evolving security situation. Other shipping companies were expected to follow suit.

The repercussions extended beyond the Strait of Hormuz. Analyst Sea/Intelligence noted that the attacks also dashed hopes for a large-scale return of container traffic to the Red Sea in 2026. The combination of the Houthi-related relocation from the Red Sea, which has been ongoing since 2024, and now the Hormuz crisis meant that two of the world's three most critical shipping bottlenecks were disrupted simultaneously.

The oil market is on the brink of shock

Oil markets were closed on Saturday, February 28, when the attacks began, meaning the full force of the price reaction would not be visible until Monday's market open. Even on Friday, before the attacks, Brent crude had closed at $72.48 a barrel, up 2.6 percent, and US West Texas Intermediate at $67.02. However, analysts had expected dramatically higher prices.

Barclays predicted that Brent crude oil could test the $100 per barrel mark on Monday. Energy analyst Bob McNally warned that Iran might try to make the Strait of Hormuz dangerous for commercial shipping, which would also push oil prices above $100. He emphasized that the market was underestimating Tehran's substantial stockpiles of mines and short-range missiles, which could significantly disrupt traffic in this vital waterway.

Even before the attacks, Bloomberg New Energy Finance's analysis had calculated that a complete blockade of the Strait of Hormuz, through which approximately 20 million barrels of oil flow daily, could tip the supply situation into a potential deficit, even with continued OPEC+ production increases. Reuters reported that a prolonged conflict impacting supply could drive oil prices to around $100, adding 0.6 to 0.7 percentage points to global inflation.

McNally described a particularly worrying scenario for Asian markets: If Asia's major oil importers realized that Hormuz was blocked, unprecedented bidding for available supplies would ensue. To stabilize prices, they would have to rise to a level that would lead to a decrease in demand, which in turn would mean an economic slowdown. In such a scenario, the Trump administration could draw on the Strategic Petroleum Reserve, which holds approximately 415 million barrels.

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Impact on LNG supply and gas prices

Besides the crude oil market, significant disruptions were also threatening the global liquefied natural gas (LNG) market. Eleven ballasted LNG tankers were already showing signs of slowing down, reversing course, or coming to a standstill near the Strait of Hormuz. Laura Page, Kpler's LNG and natural gas insight manager, warned that this number would increase in the coming days, potentially jeopardizing Qatari LNG deliveries to the global market. Qatar is one of the world's largest LNG exporters, and almost all of its exports must transit the Strait of Hormuz.

For Europe, which has massively increased its LNG imports since the disruption of Russian pipeline gas, this development posed a particularly acute risk. An interruption of Qatari supplies would plunge the European gas market into a period of heightened volatility and potentially significantly rising prices. The vulnerability of the European gas market, already exacerbated by the Russian-Ukrainian energy crisis, made the region especially susceptible to a second supply crisis within just a few years.

Container traffic and global supply chains

The impact on global container traffic extended far beyond the immediate Persian Gulf. Ports in the Gulf states, including the important Jebel Ali transshipment hub in Dubai, reported closures and operational disruptions. A fire had broken out at the Jebel Ali port following an Iranian attack, highlighting the vulnerability of the region's logistics infrastructure.

The strategic importance of the Gulf ports for global logistics can hardly be overstated. Jebel Ali is the largest port in the Middle East and a key transshipment point for trade between Asia, Europe, and Africa. A prolonged disruption of this hub would have cascading effects on global supply chains, from consumer goods to industrial supplies. Companies that were already still reeling from the supply chain disruptions of 2020 to 2023 and were just beginning to adjust to the Houthi-related diversions in the Red Sea faced yet another logistical reorganization of enormous proportions.

Freight rates for very large crude oil tankers transporting oil from the Middle East to China had already more than doubled since the beginning of the year, even before the attacks, reflecting both increased risks and a shrinking number of available vessels. Container freight markets were facing similar dynamics, with the full impact depending on the duration of the Hormuz blockade.

Financial market reactions

Although the main attacks began on a weekend and Western stock markets were closed, analysts and investors were preparing for significant turbulence. Barclays warned that Brent crude oil could test the $100 mark on Monday. Gold, which had been in a bull market for over a year and had already surpassed $5,000 per ounce, received another potential catalyst from the Iran confrontation.

The iShares US Aerospace and Defense ETF was already up 14 percent since the beginning of 2026, with significant price jumps immediately after the intervention in Venezuela and again in February, as the US approached war with Iran. The iShares S&P Global Energy ETF rose steadily and gained 24 percent over the year, as markets priced in supply disruptions caused by various conflicts.

Market veteran Ed Yardeni cautioned against buying on Monday's immediate price decline, arguing that the risk-reward ratio was unconvincing. He suggested that a war lasting more than a few days and catching investors off guard would trigger a more pronounced negative reaction. A Goldman Sachs analyst recommended waiting until the S&P 500 fell by more than 10 percent before considering buying. Lombard Odier identified the crucial turning point as whether the escalation remains confined to military targets or expands into an energy and logistics disruption, which would introduce a higher and stickier risk premium into the markets.

Macroeconomic shockwaves

The overall economic impact of the Iran war depends crucially on the duration and intensity of the supply disruption, but even optimistic scenarios imply significant economic costs. A prolonged rise in oil prices to over $100 a barrel would exacerbate inflationary pressures in a global economy already struggling with persistent inflation. Reuters estimated that such a price increase could add 0.6 to 0.7 percentage points to global inflation.

For the US, where core inflation is already at three percent and the Federal Reserve is caught in a difficult balancing act between supporting growth and fighting inflation, an energy price shock would further restrict monetary policy options. The European Central Bank, which had only just pushed inflation below its two percent target, might have to recalibrate its interest rate policy. For the emerging economies of Asia, especially India, which is heavily dependent on energy imports, and China, which as the world's largest oil importer is most vulnerable to a Hormuz blockage, the consequences would be particularly severe.

Japan and South Korea, both economies almost entirely dependent on energy imports, would face an existential supply crisis should the blockade of the Strait of Hormuz continue much longer. Memories of the oil price shocks of the 1970s, which plunged Japan's economy into severe recessions, would inevitably resurface in Tokyo and Seoul.

The logistical reorganization

Beyond the immediate issue of energy supply, the Iran war is forcing a fundamental recalculation of global trade routes. The simultaneous disruption of the Strait of Hormuz and the ongoing dangers in the Red Sea from Houthi attacks mean that the two most important transit routes between Asia and Europe are compromised. Ships would have to take the significantly longer route around the Cape of Good Hope, which would add weeks to transit times and massively increase transport costs.

For the global logistics industry, this is a nightmare scenario. Already strained shipping capacities are further congested by longer routes, as more ships are needed for the same transport volume. The cascading effects on just-in-time supply chains, inventory levels, and production planning are significant. Industries with particularly time-critical supply chains, from the automotive industry to semiconductor manufacturing and food supply, are facing acute challenges.

Industrialized nations have learned from the supply chain shocks of the pandemic and the Suez Canal blockade in 2021, and have in some cases increased their stockpiles. However, the scale of a simultaneous disruption of the Strait of Hormuz and the Red Sea exceeds all previous planning scenarios. The political demands for nearshoring and friendshoring—that is, the relocation of production and trade to geopolitically friendly locations—are receiving a new and urgent impetus from this crisis.

The irony of strategic vulnerability

Perhaps the most remarkable irony of the Iran war lies in the strategic vulnerability it exposes. The United States, which initiated the attack to secure its interests in the Middle East, is, as the world's largest oil producer, less directly affected by a Hormuz blockade than its allies. It is America's closest partners, the Gulf states, who cannot ship their oil exports; its European allies, who face an energy crisis; and its Asian trading partners who pay the highest price.

Saudi Arabia's oil exports, which primarily pass through the Strait of Hormuz, are at stake, as are Qatar's gas exports and Kuwait's and the UAE's oil supplies. These states, several of which have suffered Iranian retaliatory attacks on their infrastructure, find themselves in the paradoxical situation of being both victims of Iranian aggression and economic victims of the American-Israeli military operation.

Between quick fix and long-term crisis

The crucial question hanging over the global economy at the end of February 2026 is the duration of the conflict. Vice President Vance had declared that there was no chance of a protracted war lasting for years. However, the formulation of war aims, the de facto decapitation of the Iranian leadership, the widespread Iranian retaliation against US bases throughout the region, and Ali Larijani's announcement of a provisional leadership council all point to a dynamic that could defy a swift resolution.

For the global economy, every day of the Hormuz blockade means higher costs. Even if the United States can implement its stated intention and guarantee safe shipping routes through the Gulf and the Strait of Hormuz, the insurance industry will drastically increase risk premiums for transport through this region for years to come. The economic scars of this crisis will be felt far beyond the duration of the military operations and will strike the already fragile fabric of the globalized economy at its most vulnerable points.

On March 1, 2026, the world faces a situation where geopolitical risks to global trade and energy supplies are higher than they have been since the oil crisis of the 1970s. The Iran-Iraq War is not merely a military conflict. It is a stress test for a global economic system that, despite all the diversification efforts of recent years, remains critically dependent on unimpeded passage through a few key waterways. The outcome of this stress test will shape the contours of the global economy for years to come.

Konrad Wolfenstein

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