Hormuz Strait Disruption Sparks Global Energy Shock
Energy markets are facing significant stress due to the disruption of traffic through the Strait of Hormuz, which has become known as the 2026 Hormuz shock. The conflict in the Middle East has caused a global energy shock, affecting around 20 million barrels per day of crude oil and oil products, and approximately 110 billion cubic meters of liquefied natural gas (LNG) per year.
The Strait normally carries about one quarter of global seaborne oil trade and close to one fifth of global LNG trade. The prices of major energy commodities immediately rose, with jet fuel, diesel, and gasoline prices increasing significantly. However, despite the unprecedented size of the physical supply loss, prices did not rise as much as they could have due to high pre-war inventories, emergency stock releases, rerouting, and demand compression.
According to the authors' calculations based on IEA data, the disruption of roughly 20 million barrels per day of Hormuz oil flows left an estimated net shortfall of around 12 million barrels per day after partial offsets by the pre-war surplus, lower demand, alternative supply, and emergency stock releases. The gas shock was smaller in volume terms than the oil shock but more constrained logistically.