On March 3, the Strait of Hormuz once again became the focus of global economic attention amid escalating conflict in Iran and its retaliatory actions in the Middle East. Analysts warned that even partial or temporary disruptions to oil supplies could have a significant impact on the global economy; a prolonged closure of the Strait could lead to a "certain recession" for the global economy.
Bob McNally, founder of Rapidan Energy Group and former energy advisor to the George W. Bush administration, said, "A prolonged closure of the Strait of Hormuz would lead to a definitive recession in the global economy."
According to data from the U.S. Energy Information Administration, approximately 20% of global liquefied natural gas (LNG) trade and about 38% of global crude oil supply passed through the strait in 2024. Saudi Arabia alone transported approximately 5.5 million barrels of crude oil daily through this strait in 2024. Although alternative pipelines exist across the Arabian Peninsula, their limited capacity makes it difficult to compensate for the loss if the strait were completely closed.
Market expectations have already been disrupted even though Iran has not yet actually blocked the strait. Media reports indicate that the Iranian military warned the area was "unsafe," and ship traffic through the strait decreased by approximately 70% compared to the previous day.
Research institutions estimate that if the strait closure lasts for more than a year, approximately 15% of global LNG supply will disappear, with Europe, India, and Japan bearing the brunt of the import shock. Analysts believe that if Gulf energy infrastructure is attacked or the passage restrictions are prolonged, oil prices could rise to over $100 per barrel. Some institutions assess the probability of oil prices reaching $120 to be about 20%.
However, analysts also point out that Iran faces real constraints in implementing a long-term blockade, including the US military presence in the region and the potential diplomatic consequences of cutting off energy supplies. Historically, Iran has repeatedly threatened to close the Strait of Hormuz, but has never actually done so.
Energy consultancy Wood Mackenzie points out that the oil crisis of the 1970s triggered a global recession, but the global economy's dependence on oil has significantly decreased. For a shock of that scale to be replicated, oil prices would likely need to rise to around $200 per barrel. The firm believes that if the conflict continues to drive up oil and gas prices and impacts vulnerable economies, the resulting volatility in global financial markets may force affected countries to seek mitigation measures.
