The World After Hormuz

Four months have passed since the closure of the Strait, and the market is beginning to price in the reopening of the Strait of Hormuz, while the global system has yet to fully absorb the lost production, the drawdown in strategic reserves, the permanent damage to Qatari LNG infrastructure, and the cost of an energy resilience that will persist well beyond the military crisis itself.

Executive summary

Following the near-paralysis that began on 28 February, the Strait of Hormuz is showing the first signs of reopening. In recent days, a number of tankers and LNG carriers have resumed transiting the waterway. This is the result of negotiations between the United States and Iran, which have produced a 60-day roadmap; consequently, Brent crude has rapidly surrendered a significant portion of the geopolitical premium accumulated during the most acute phase of the crisis.

This reaction is consistent with the way financial markets operate, since — as is well understood — they tend to discount everything in advance. This is why the oil price does not wait for every vessel to be back under way, or every facility to be fully operational again, but instead anticipates the probability that this may occur. The resumption of negotiations was therefore sufficient to bring Brent well below the peaks reached during the crisis.

The real economy, however, operates differently. Production, insurance, terminals, strategic reserves, LNG contracts, fertilisers and logistics chains do not normalise on the back of a diplomatic statement. Shipping companies must verify the safety of routes, underwriters must return to covering voyages on sustainable terms, mines must be cleared from the seabed and damaged facilities must be rebuilt.

For a professional investor, the critical distinction lies between the spot price of energy and the structural cost of security: the former can fall very rapidly on the strength of a simple statement, while the latter has already risen and will remain embedded in the system for years.

In the following chart we examine data relating to the Hormuz corridor

A closure more economic than military

During the crisis, the closure was not absolute, as some vessels continued to transit through selective corridors, political authorisations or protected passages. From an economic standpoint, however, the distinction is marginal. When traffic falls from an average of 129 vessels per day to just 6, the route is no longer genuinely available for international trade.

The closure was therefore de facto rather than formally declared, because for nearly four months one of the most critical arteries in the global energy system became unpredictable, costly and at times unusable. Prior to the conflict, approximately 14 million barrels per day of crude oil and condensates transited the strait, along with a further 6 million barrels per day of refined products; on top of this petroleum component, nearly one-fifth of the world's LNG — exported primarily from Qatar and destined for Asia — also passed through.

In the following chart we observe the collapse from 28 February, a decline of nearly 95%

Hormuz is a critical chokepoint on maritime trade routes. Saudi Arabia and the United Arab Emirates have pipeline infrastructure that allows a portion of crude oil to be routed towards the Red Sea and the port of Fujairah respectively, both beyond the Strait. The additional capacity realistically available for use, however, ranges between 3.5 and 5.5 million barrels per day — well below the volumes moved under normal conditions.

For gas, the constraints are even more rigid: while crude oil can be stockpiled, transferred or partially rerouted, Qatari LNG must be loaded onto LNG carriers and transported through the Strait. No overland pipeline exists that is capable of redirecting equivalent volumes to an export terminal outside the Gulf.

Below we observe the existing alternatives, which nonetheless cannot substitute for Hormuz.

In the chart below we observe the existing alternatives, which nonetheless cannot substitute for Hormuz

The reopening announced in June does not immediately eliminate these constraints. Shipowners must verify that the political agreement is stable, that shipping lanes have been cleared and that insurance coverage is once again available. A financial normalisation may therefore precede a physical one, but the two must not be conflated.

Oil: from record scarcity to a potential surplus

The closure of Hormuz triggered a contraction in global supply of 10.1 million barrels per day in March alone. The IEA described it as the largest supply disruption ever recorded in the history of the oil market. Production among OPEC+ countries fell by 9.4 million barrels per day, while refiners and consumers began drawing on available inventories to replace cargoes stranded in the Gulf.

By May, cumulative undelivered supply for Gulf producers had exceeded one billion barrels. Global supply remained 13.6 million barrels per day below pre-conflict levels.

In the chart below we observe the repricing driven by the supply shortage

The response from governments was immediate and proportionate to the severity of the shock. IEA member countries authorised the release of more than 400 million barrels from emergency reserves, marking the largest coordinated intervention in the Agency's history. Public reserves held by OECD countries consequently fell to their lowest levels since 1990.

The release mitigated the immediate shortfall, while shifting a portion of demand into the future. The barrels drawn down will need to be repurchased, and governments are likely to seek to rebuild stockpiles during a period of lower prices and greater availability, creating a source of demand capable of supporting the market even after Gulf production returns.

The above would be the natural consequence of reactivating previously idled production capacity, while demand continues to be weighed down by elevated prices, economic weakness and energy substitution. A long-term thesis cannot be built on the premise of a permanently above-$100 Brent, because the crisis may leave a structural premium without generating structurally elevated prices. That premium will manifest through greater volatility, a futures curve more sensitive to physical risks, increased hedging activity, new strategic reserves, duplicated infrastructure and wider differentials between geographic regions and crude grades.

Shipping and insurance: the invisible dimension of the shock

What immediately stands out is the sharp rise in the cost of moving energy, compounded by the way the Strait closure sent prices soaring. Between late February and early April, the dirty tanker freight rate index climbed to 180 from its pre-crisis level of 100. For clean tankers, primarily used to transport refined products, the index surged to 215.

The following chart illustrates the abrupt spike in the index

The war-risk insurance premium has become a fixed component of every voyage. Examining the figures, coverage equivalent to 0.25% of the value of a $100 million vessel already implies an outlay of $250,000. Should the premium rise to 1%, the cost reaches $1 million per single voyage. For a next-generation LNG carrier, the insured value may be considerably higher.

What is certain is that these costs will be difficult to eliminate as the first vessels transit, because underwriters will only reduce premiums once observed risk has declined materially. A temporary ceasefire, intermittent transits and renewed threats can keep war-risk premiums elevated even with the Strait formally open.

The effect then transmits to companies that do not operate directly in the energy sector, because longer lead times require advance ordering. Uncertainty drives higher inventory holdings, and supplier diversification increases operational complexity. The supply chain becomes more resilient, but far less efficient. There is a clear shift from just-in-time to a more precautionary approach to inventory management as protection against disruptions, but this reduces working capital turnover, compresses returns, and has a tangible effect on the broader economy.

LNG, where no one is looking

In the gas market, the reopening of the Strait resolves the problem only in part. The critical issue concerns the attacks on Ras Laffan, which damaged two of Qatar's fourteen liquefaction trains and a gas-to-liquids facility. A vessel can therefore resume transit as soon as security conditions permit. A destroyed liquefaction plant, by contrast, cannot resume production through a diplomatic agreement.

In the chart below, we observe the sharp variation in the Middle Eastern contribution to global cargo flows

In the other chart, we observe how volatility has returned to crisis levels

The consequences extend well beyond the gas price. Condensates, LPG, helium, naphtha, sulphur and other products used in the chemical, manufacturing and technology sectors all depend on the liquefaction process and related activities. The loss of Qatari capacity therefore produces a far broader scarcity than that of the LNG molecule alone.

Bargaining power within the market shifts, as Asian importers will have a greater incentive to lock in supply through multi-year contracts, thereby reducing their reliance on spot purchases. The United States, Australia and other exporters outside the Gulf consequently gain greater relevance. Europe is thus forced to compete with Asia for a more limited supply, a dynamic that risks further entrenching its dependence on US LNG.

Inventories become an instrument of economic policy

China navigated the most critical phase of the crisis from a relatively favourable position, owing to reserves accumulated in prior years. Beijing was able to reduce purchases during price spikes, thereby avoiding aggressive competition for every available cargo on the market.

The function of strategic reserves thus proved broader than mere protection against a physical shortage, because a country with adequate reserves can choose when to enter the market, whereas a country without coverage must purchase even when freight rates, insurance costs and prices reach extreme and unsustainable levels.

India, Japan, South Korea, South-East Asian nations and European economies will now have an incentive to increase their days of cover through their own reserves. This will require new storage tanks, terminals, underground caverns, logistical connections and the financial resources to fill them. The phenomenon will likely extend beyond oil: gas, refined products, industrial components and raw materials deemed strategic will increasingly feature in economic security programmes.

As a result, a portion of future demand will not stem from current consumption, but from the fear of a new crisis and from the need to rebuild reserves and fund a more protected system.

A lens of observation from fertilisers to food

Hormuz is also one of the world's principal arteries for fertiliser trade. We note that in 2024 approximately 16 million tonnes were shipped by sea from the Gulf region, a volume close to one-third of global maritime trade. Around 60% of these volumes consisted of urea.

In the following chart we observe a concentrated dependence on nitrogen fertilisers

In the chart below we observe the renewed price rally, which is no marginal episode

The crisis is affecting the agricultural sector through three simultaneous channels. The reduction in exports constrains physical availability, the rise in natural gas prices increases the production costs of nitrogenous fertilisers, while freight rates and insurance make delivery more expensive even when product is available.

The World Bank fertiliser index rose by more than 12% in the first quarter of 2026. In April, urea surpassed $850 per tonne, an increase of 80% relative to February. For the full year, the World Bank projects an average fertiliser price increase of more than 30% and a rise of close to 60% for urea.

The impact on food prices will not materialise immediately, as many farmers in the northern hemisphere had already purchased a portion of the inputs required for the current season. The most significant effects will therefore emerge in subsequent crop cycles, when the higher cost could reduce application rates, alter crop selection, or compress margins to the point of rendering certain production activities economically unviable.

This reduction will not generate inflation immediately, as it will first weaken yields, then constrain agricultural supply, and ultimately reach the consumer. By the time the second wave feeds through to food prices, Brent could already have returned to considerably lower levels.

Stagflation and central banks

The World Bank projects global growth to slow from 2.9% in 2025 to 2.5% in 2026, while inflation is expected to rise from 3.3% to 4.0%. This represents an adverse combination, known as stagflation, characterised by higher inflation alongside weaker growth.

In the following chart we observe the slowdown in global trade

In the following chart we observe the relationship between oil and the cost of living

Raising interest rates will certainly not resolve the issue of oil production, the repair of an LNG train, or the effort to clear the Strait of Hormuz of naval mines. It can only prevent the initial cost increase from becoming embedded in wages, corporate margins and expectations. An excessively restrictive policy stance would amplify the economic slowdown, while an excessively accommodative one increases the risk that a temporary shock becomes persistent.

The ECB projects that eurozone energy inflation will reach 12.5% in the third quarter of 2026. The pass-through to fuel prices will be rapid, while second-round effects on industrial goods, services and food will continue to feed through into 2027. In the Eurosystem projections, food inflation reaches its peak only in the second quarter of next year, i.e. in Q2 2027.

In the following chart we observe the dispersion of scenarios, which remains extreme

The eurozone remains particularly vulnerable because it imports the bulk of the energy it consumes and participates in the global LNG market as a price taker, whereas the United States benefits from superior domestic production and can draw on exports of crude oil and natural gas. Nevertheless, the American economy will also feel the impact of higher fuel costs, which will weigh on consumption and expectations.

The most severe pressure will then fall on importing countries with weak currencies, because the combination of energy priced in dollars and the ensuing rise in commodity costs can trigger a depreciation of the domestic currency, thereby increasing the cost of imports, domestic inflation and external debt servicing. For some emerging-market economies, the energy shock could translate into fiscal and sovereign risk.

The crisis reshapes the energy geography

There is a marked shift in the quality of energy reserves, because, unlike before, size alone no longer determines strategic value — what matters equally is the ability to bring those reserves to market without transiting any chokepoint.

Saudi Arabia and the United Arab Emirates are relatively better insulated thanks to the East-West Pipeline to Yanbu and the Abu Dhabi export line. These infrastructures do not replace Hormuz, but they allow both countries to continue exporting a significant share of their output even during a closure.

Qatar, Kuwait and Iraq remain far more exposed. For Qatar, the situation is compounded by its dependence on LNG and the absence of any viable logistical alternative. Kuwait sits deep within the Gulf, while Iraq relies heavily on southern export routes and oil revenues to finance the public budget.

China possesses the reserves, financial capacity and sufficiently large industrial base to absorb the shock more effectively. India and South-East Asia face greater vulnerability: they import a high proportion of the energy they consume, rely on subsidies to contain domestic fuel costs and are more susceptible to pressure on their currencies and trade balances.

Europe directly imports a smaller share of the barrels transported through Hormuz, but pays the global marginal price. When Asia competes to replace Middle Eastern LNG and crude oil, the cost borne by European companies rises as well.

The United States starts from a relatively stronger position. Domestic production, LNG exports and access to Canadian resources limit physical vulnerability. Refineries, terminals and producers in the Atlantic Basin also stand to benefit from the need to replace part of the Gulf flows.

The crisis therefore creates a growing divergence between importers and exporters, economies holding strategic reserves and countries forced to procure on the spot market, producers connected to alternative routes and producers landlocked within the Strait.

A new investment cycle

The Hormuz crisis will render economically viable even projects that, under normal conditions, would have been considered redundant or insufficiently profitable. Saudi Arabia and the United Arab Emirates can expand the capacity of existing pipelines and terminals located beyond the Strait, while Oman and the port of Duqm can assume a more prominent role as logistical hubs oriented towards the Indian Ocean. Qatar, Kuwait and Iraq, meanwhile, will be pushed to re-examine cross-border projects capable of linking production to alternative routes, reducing a dependency that, during the crisis, has revealed its full fragility.

The same process will affect importing countries, which will need to allocate greater resources to storage facilities, regasification terminals, oil terminals, electricity grids, interconnections and fuel-switching systems. This opens a favourable capital expenditure cycle for companies active in engineering, infrastructure, energy services, terminalling and storage. Greater security will, however, come at a cost, since alternative installations and connections will need to be financed and maintained even during periods when they remain partially idle. The capital deployed will therefore be less efficient, but the system will be better equipped to withstand a fresh supply disruption.

This shift will simultaneously support investment in both fossil fuels and clean technologies. In the short term, governments may increase domestic extraction, coal consumption, LNG imports and the use of petroleum products. Over a longer horizon, however, the vulnerability of maritime routes will reinforce the economic value of renewables, nuclear power, batteries, electricity grids and energy efficiency. Producing more energy within national borders, electrifying transport and expanding storage systems means reducing exposure to imported fuels. The energy transition thus also takes on a strategic function: limiting dependence on routes that can be disrupted or controlled by military means.

Scenario map

Investment view

Crude oil presents a symmetric risk, as a credible reopening could trigger a significant correction, while a fresh incident could rapidly rebuild the premium on the front end of the curve.

The long-term thesis concerns assets that stand to benefit from increased resilience — namely non-Gulf LNG, pipelines, terminals, storage facilities, energy infrastructure, security services, maritime transport and fertilisers produced outside the most vulnerable areas.

What determines the validity of the thesis

The variable to watch remains actual traffic, as political announcements must translate into a sustained increase in the number and type of vessels transiting the Strait. Only a clear and decisive reduction in insurance premiums will provide more reliable confirmation, as it will signal the private sector's willingness to resume the risk.

Gulf production will then need to come back on stream, as the restoration of shipping routes and the associated export flows will not indicate an immediate reactivation of wells, terminals and refineries. With regard to oil, it will be necessary to monitor the structure of the futures curve and the pace of strategic reserve replenishment. On gas, the decisive variables will be the timelines communicated by QatarEnergy, developments in the North Field Expansion, and the spreads between Henry Hub, TTF and JKM.

Monitoring will finally need to shift to fertilisers. Urea, ammonia, DAP and MAP will provide early signals of any potential transmission of the shock to harvests and food price inflation. The crisis can be considered truly resolved only when traffic, insurance conditions, production and inventories simultaneously return to normality.

Operational conclusion

The reopening of the Strait of Hormuz may have a more immediate impact on oil prices, as a resumption of exports and a return to normality could boost near-term supply and cause prices to fall sharply.

As for gas, the system will not return to normal immediately. Qatar's LNG facilities sustained significant damage, the effects of which will remain visible for years. Added to this is the political will of various countries to rebuild and expand strategic reserves, so as to ensure better management in the event of a new crisis.

Farmers will have to absorb higher fertiliser costs. As a result, central banks will continue to manage inflationary effects that will feed through to economies at different points in time. The market will therefore reflect the evolution of diplomatic developments through the price of Brent crude.

What changes after the Hormuz crisis is, above all, the perception and management of energy. Nations will increase investment in infrastructure, nuclear plants and renewable energy, because the crisis has demonstrated how fragile global trade is. The closure of a strait through which a significant share of the world's energy passes can fuel inflation and crises, pushing prices to levels that are unsustainable for businesses and consumers.

The world after Hormuz will be a different world — one defined by greater insurance coverage for energy transportation, longer-term agreements and, above all, storage capacity.

Our operational view is that the oil price could resume its decline in the months following any agreement reached between the United States and Iran, while the gas price will remain elevated for longer. The return to pre-closure production levels will not be immediate. We therefore anticipate sustained demand driven by the rebuilding of reserves and the creation of new storage facilities, while supply will recover only gradually.

Principal sources consulted

1. International Energy Agency, Strait of Hormuz: oil security and alternative routes.
2. UN Trade and Development, Strait of Hormuz disruptions: implications for global trade and development.
3. UN Trade and Development, Growth and financial implications.
4. International Energy Agency, Oil Market Report, June 2026.
5. QatarEnergy, Official update on damage at Ras Laffan.
6. International Energy Agency, Gas Market Report Q2 2026, executive summary.
7. World Bank, Fertilizer prices surge as Strait of Hormuz disruptions tighten supply.
8. European Central Bank, Eurosystem macroeconomic projections, June 2026.
9. World Bank, Global Economic Prospects, June 2026.
10. Reuters, Updates on negotiations and the reopening of the Strait.

The Financial Spectator · Macro Strategy · 24 June 2026