The World After Hormuz

Four months have passed since the Strait closed, and the market is beginning to price in the reopening of the Strait of Hormuz, even as the global system has yet to absorb the lost production, the drawdown in strategic reserves, the permanent damage to Qatari LNG, and the cost of an energy resilience that will outlast the military crisis by a considerable margin.

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, several tankers and LNG carriers have resumed transit. This is the result of negotiations between the United States and Iran, which have produced a 60-day roadmap; as a consequence, Brent has rapidly surrendered a substantial portion of the geopolitical premium it had accumulated during the most acute phase of the crisis.

This reaction is consistent with how financial markets operate, because, as we know well, they tend to price 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 anticipates the probability that this may happen. The resumption of negotiations was therefore sufficient to pull Brent well below the highs 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, insurers must return to covering voyages on viable terms, mines must be cleared from the seabed and damaged facilities must be rebuilt.

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

The following chart shows 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 escorted 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 commerce.

The closure was therefore de facto rather than necessarily formal, because for nearly four months one of the most critical arteries in the global energy system became unpredictable, costly and at times unusable. Before the conflict, approximately 14 million barrels of crude oil and condensates passed through the Strait each day, along with a further 6 million barrels of refined products; on top of this petroleum component came nearly one fifth of global LNG, exported predominantly by Qatar and bound for Asia.

The following chart shows the collapse from 28 February, a decline of nearly 95%

Hormuz is a critical chokepoint on maritime shipping routes. Saudi Arabia and the United Arab Emirates have pipelines that allow a portion of their crude oil to be routed towards the Red Sea and the port of Fujairah, respectively, already beyond the Strait. The additional capacity that can realistically be utilised, 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, because oil can be stockpiled, transferred or partially rerouted, whereas Qatari LNG must be loaded onto tankers and has to transit the Strait. There is no overland pipeline capable of moving equivalent volumes to an export terminal outside the Gulf.

Below we examine the existing alternatives, which are nonetheless unable to replace Hormuz.

In the chart below we examine the existing alternatives, which are nonetheless unable to replace Hormuz

The reopening announced in June does not immediately remove these constraints. Shipowners must verify that the political agreement is stable, that the routes have been cleared and that insurance coverage is once again available. Financial normalisation may therefore precede physical normalisation, but the two must not be mistaken for one another.

Oil: from record scarcity to a potential surplus

The closure of Hormuz caused 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 from 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 missed deliveries from Gulf producers had exceeded one billion barrels. Global supply was still 13.6 million barrels per day below pre-conflict levels.

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

The response from governments was immediate and commensurate with the severity of the shock. IEA member countries authorised the release of over 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 contained the immediate supply shortage, 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 inventories during a phase of lower prices and greater availability — creating a source of demand capable of supporting the market even after Gulf production returns.

What has been described 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. The long-term thesis cannot be built on the assumption of Brent permanently above $100, because the crisis may leave a structural premium without generating structurally high 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 regions and crude grades.

Shipping and insurance. The invisible side of the shock

What immediately stands out is how sharply the cost of moving energy has risen, and how the closure of the Strait sent prices through the roof. Between late February and early April, the dirty tanker freight index reached 180 against the pre-crisis baseline of 100. For clean tankers, used primarily for refined products, the index climbed as high as 215.

The following chart shows the sudden surge in the index

The war-risk insurance premium has become a fixed component of every voyage. Looking at the numbers, coverage equal to 0.25% of the value of a $100 million vessel already amounts to $250,000. Should the premium rise to 1%, the cost reaches one million dollars per single voyage. For a next-generation LNG carrier, the insured value can be considerably higher.

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

The effect then feeds through to companies that do not operate directly in the energy sector, because longer delivery times require earlier ordering. Uncertainty drives higher inventory holdings, and supplier diversification increases operational complexity. Supply chains become more resilient, but far less efficient. There is a clear shift from just-in-time to a more precautionary inventory management approach aimed at hedging against disruptions, but this reduces working capital turnover, compresses returns, and has a tangible effect on the broader economy.

LNG, where nobody 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 one 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.

The chart below shows the sharp change in the Middle Eastern contribution to global LNG cargoes

The other chart shows how volatility has returned to crisis-level readings

The consequences extend well beyond the price of gas. 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 scarcity that reaches far beyond the LNG molecule itself.

The balance of negotiating power within the market shifts, as Asian importers will have a stronger 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 in strategic relevance. Europe is therefore forced to compete with Asia for a more limited supply, which risks further entrenching its dependence on US LNG.

Stockpiles become an instrument of economic policy

China navigated the most critical phase of the crisis from a relatively favourable position, thanks to the reserves it had built up in preceding years. Beijing was able to scale back purchases during price spikes, avoiding the need to compete aggressively for every available cargo on the market.

The role of strategic stockpiles thus proved broader than mere protection against a physical shortage: a country holding adequate reserves can choose when to enter the market, whereas a country without such coverage must buy regardless of whether prices, freight rates and insurance have reached extreme and unsustainable levels.

India, Japan, South Korea, South-East Asian nations and European economies will now have a strong incentive to increase their days of coverage 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 well 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 resilient system.

A lens of observation from fertilisers to food

Hormuz is also one of the world's principal arteries for fertiliser trade. In 2024, approximately 16 million tonnes were shipped by sea from the Gulf region, a volume approaching one third of global seaborne trade. Around 60% of these volumes consisted of urea.

The following image illustrates a concentrated dependence on nitrogenous fertilisers

The chart below shows that the renewed price surge is no marginal episode

The crisis acts on 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 the product is available.

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

The impact on food prices does not materialise immediately, as many farmers in the northern hemisphere had already purchased a portion of the inputs needed for the current season. The most significant effects will therefore emerge in subsequent growing seasons, when higher costs may reduce application volumes, alter crop selection or compress margins to the point of making certain forms of production economically unviable.

This reduction will not generate inflation immediately, because it will first weaken yields, then constrain agricultural supply, and only then reach the consumer. By the time the second wave hits food prices, Brent may already have returned to far lower levels.

Stagflation and central banks

The World Bank projects that global growth will 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 unfavourable combination known as stagflation, in which higher inflation coincides with lower growth.

The following chart shows the slowdown in world trade

The following chart examines the relationship between oil prices and the cost of living

Higher interest rates will certainly not solve the problem of oil production, the repair of an LNG train, or the attempt to clear the Strait of Hormuz of naval mines. They can only prevent the initial cost increase from becoming embedded in wages, corporate margins, and expectations. A policy that is too restrictive amplifies the economic slowdown, while a policy that is too accommodative raises the risk that the 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 the indirect effects on industrial goods, services, and food will continue to ripple through 2027. In the Eurosystem projections, food inflation peaks only in the second quarter of next year, i.e. Q2 2027.

The following chart shows the dispersion of scenarios, which remains extreme

The eurozone remains particularly vulnerable because it imports a large share of the energy it consumes and participates in the global LNG market as a price taker, whereas the United States benefits from greater domestic production and can capitalise on exports of crude oil and 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 fall on importing countries with weak currencies, because the combination of energy priced in dollars and the resulting commodity surge can trigger depreciation of the domestic currency, thereby raising import costs, domestic inflation, and external debt-service burdens. For some emerging economies, the energy shock could translate into fiscal and sovereign risk.

The crisis redraws the energy map

There has been a marked shift in what matters when assessing the quality of energy reserves: unlike before, size alone is no longer sufficient — what counts is also 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 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 a viable logistical alternative. Kuwait sits in the innermost part of the Gulf, while Iraq relies heavily on southern exports and on oil revenues to finance its public budget.

China has the reserves, the financial capacity, and an industrial base large enough to absorb the shock more effectively. India and South-East Asia are more vulnerable: they import a high proportion of the energy they consume, rely on subsidies to contain domestic fuel costs, and are more sensitive to pressure on their currencies and trade balances.

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

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

The crisis therefore creates a growing dispersion between importers and exporters, economies holding inventories and countries forced to buy on the spot market, producers connected to alternative routes and producers trapped 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 unprofitable. 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 take on a more prominent role as logistical hubs oriented towards the Indian Ocean. Qatar, Kuwait and Iraq will instead be pushed to re-examine cross-border projects capable of connecting production to alternative routes, reducing a dependency that has shown all its fragility during the crisis.

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

This shift will simultaneously support investment in both fossil fuels and clean technologies. In the near 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 therefore also takes on a strategic function: limiting dependence on routes that can be interrupted or controlled militarily.

Scenario map

Investment view

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

The long-term thesis centres on assets that benefit from increased resilience: LNG sourced outside the Gulf, pipelines, terminals, storage facilities, energy infrastructure, security services, maritime shipping 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 an even more reliable confirmation, signalling the private sector's willingness to reassume the risk.

Gulf production will then need to come back online, as the restoration of shipping lanes and the resulting exports will not indicate an immediate reactivation of wells, terminals and refineries. On oil, it will be necessary to monitor the structure of the futures curve and the pace of strategic reserve rebuilding. On gas, the decisive variables will be the timelines communicated by QatarEnergy, the progress of the North Field Expansion and the spreads between Henry Hub, TTF and JKM.

Monitoring will ultimately need to shift to fertilisers. Urea, ammonia, DAP and MAP will front-run any potential transmission of the shock to harvests and food inflation. The crisis can be considered truly resolved only when traffic, insurance, 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 normalcy could increase near-term supply and cause prices to fall sharply.

As for gas, however, the system will not return to normal straight away. Qatar's LNG facilities suffered 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 reach economies at different times. The market will therefore reveal the evolution of diplomatic developments through the Brent price.

What has undoubtedly changed in the wake of the Hormuz crisis is 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, driving prices to levels that are unsustainable for businesses and consumers alike.

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

Our operational view is that oil prices could resume their decline in the months following any agreement reached between the United States and Iran, while gas prices will remain elevated for longer. A 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 capacity, while supply will recover only gradually.

Main 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 staff 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