Iran’s control of the Strait of Hormuz has created a crippling new reality for the global economy. It has kept about half a billion barrels of petroleum products from global markets, fueled inflation and disrupted supply chains.
President Trump has told aides in recent days that he is willing to end the U.S. military campaign even if the Strait of Hormuz remains largely closed. Doing so would make wartime changes in the strait permanent, inject a new price premium into oil markets and push the shipping industry down a perilous path.
“It would be a disaster for energy markets because it would mean oil will have a huge surcharge from Iran,” said Ellen Wald, senior fellow at the Atlantic Council’s Global Energy Center. “There would be a massive amount of uncertainty.”
Since the start of the conflict, traffic through the strait has collapsed. Transits are down 95%, according to S&P Global Market Intelligence. On average, fewer than five ships passed through the strait each day in March, compared with around 140 every day in February.
That has prevented around 15 million barrels of oil a day—three times Russia’s daily exports—from entering the global market.
“This is a Covid-size crisis, but with the crucial difference that it comes from the supply and not the demand side. If continued, prices will have to move a lot higher to push consumers into Covid-style activity levels,” said David Wech, chief economist at ship tracker Vortexa.
Analysts at Société Générale expect cascading supply issues, including refinery shutdowns and production limits. The bank on Monday updated its forecast to $125 a barrel, warning that oil prices could breach the $150 mark.
“As long as flows don’t recover substantially, the path of least resistance remains to the upside for oil prices,” said Giovanni Staunovo, commodity analyst at UBS.
Beyond oil markets, abandoning the Strait of Hormuz would represent a historic downgrade of the ability of the U.S. to project power, effectively dismantling America’s longstanding security guarantee in the Middle East and beyond.
Asian countries are already reeling from the downturn in energy supply. The Philippines declared a national energy emergency last week. Sri Lanka has instituted a four-day workweek for state institutions and schools. Bangladesh has banned the use of air conditioning to cool buildings under 77 degrees Fahrenheit.
Even China, one of the best-prepared countries for the oil crisis with reserves for more than 100 days, has moved to cap a rise in retail gasoline and diesel prices.
“All roads lead to higher prices and slower growth,” the International Monetary Fund wrote in a report this week. If tensions in the Gulf linger, “energy stays costly, and inflation proves hard to tame—with ongoing uncertainty and geopolitical risk.”
Transit times, determined by distance from the Middle East, dictate how the shock spreads through the global system, said Michael Haigh, head of commodities research at Société Générale. Roughly, cargoes from the Persian Gulf take about 10 days to arrive in India, three to four weeks to get to Europe and West Africa, and up to six weeks to reach the U.S. Gulf Coast.
“As a result, the supply shock does not hit end markets simultaneously. Instead, it unfolds sequentially—east to west—partially cushioned by the level of inventories available in each region,” Haigh said.
Already, the Strait of Hormuz has shifted from an open, free waterway to a permission-based chokepoint. Only select ships—especially those carrying Iranian goods—have managed to cross.
Two container vessels belonging to China’s state-owned Cosco Shipping successfully crossed the strait Monday morning. Several Indian vessels have managed to cross. Iran has agreed to allow 20 ships under the Pakistani flag to pass. On Monday, the Iranian parliament approved a plan to collect tolls on vessels traveling through the strait.
The waterway remains shut for most vessels. At least two dozen commercial vessels have been attacked in or near it, with multiple crew members killed. Some 20,000 seafarers remain stuck in the Persian Gulf, according to the International Maritime Organization.
Currently, the Islamic Revolutionary Guard Corps frequently warns ships not to cross the strait, via Marine VHF radios, which act as short-range communication devices allowing ships to hear each other when tuned to the same channel.
“Whenever the situation escalates, they reiterate the warning,” said a seafarer surnamed Wang whose vessel—carrying liquefied natural gas—has been stuck at an anchorage northwest of Dubai for four weeks.
Wang said the shipowner has repeatedly asked the captain to sail across the strait, but the crew members all refused. Wang said that to set sail, he would need to hear the Iranian Navy saying explicitly that normal traffic can resume.
In late 2023, Houthi drone and missile attacks all but halted traffic through the Red Sea and Suez Canal. Shippers started to take the longer journey around the Cape of Good Hope. Months after the Houthis said they would pause attacks on international shipping in January 2025, ship traffic in the Red Sea area was still at half its previous levels, analysts said.
Even if the strait reopens to commercial traffic, unclogging it will take weeks if not months, analysts say.
“There would obviously be an order of priority,” said Natznet Tesfay, head of insights and analysis at S&P Global Market Intelligence. Those vessels stuck in the Gulf and those waiting to enter the strait will be first. Of those, vessels carrying key products like fertilizers would have priority, especially as the Northern Hemisphere prepares for planting season, she said. Downstream products such as jet fuel and heating oil will likely be last.
Ceding the waterway to Iran would also strike a blow to the international law-of-the-sea order, surrendering the United Nations-backed principle of free transit through vital global corridors.
“One of the central pillars of the international order has been that the U.S. keeps the world’s sea-lanes open,” said Edward Fishman, director of the Center for Geoeconomic Studies at the Council on Foreign Relations. “If this war ends with Iran in control of the world’s most important energy chokepoint, that would mark a clear abdication of America’s traditional role—and other countries will take note.”
Write to Rebecca Feng at rebecca.feng@wsj.com and Georgi Kantchev at georgi.kantchev@wsj.com