The closure of the Strait of Hormuz has significantly sped up the rise in global oil prices, turning a geopolitical risk premium into a rapidly escalating supply shock that could push crude oil prices decisively towards — and even beyond — $100 per barrel.

Global energy markets were shaken after Iran’s Revolutionary Guard announced the closure of the vital waterway, leading to an immediate frenzy across trading desks. With almost a third of global seaborne crude exports passing through the strait in 2025, the blockade is not just a symbolic escalation but a direct threat to physical supply chains.

The response has been swift and strong. Brent crude futures rose by $6.05, or 7.8%, to $83.79 a barrel by 1143 GMT, reaching the highest level since July 2024 at $85.12. US West Texas Intermediate crude increased by $5.31, or 7.5%, to $76.54 after hitting the highest point since June at $77.53.

The rapid rise in prices highlights how sentiment has shifted from caution to serious concerns about supply shortages.

What has exacerbated the price surge is the extent of the disruption. Maritime intelligence data shows that shipping traffic in the corridor has plummeted by up to 80%, with approximately 150 vessels stranded in or around the strait. At least five tankers have reportedly been damaged. War-risk insurance premiums have soared to six-year highs, and many shipowners are now avoiding Gulf charters altogether.

The Strait of Hormuz carries around 20 to 21 million barrels per day of crude oil and refined products — roughly one-fifth of global oil consumption — according to the US Energy Information Administration. It also accounts for about one-fifth of global liquefied natural gas trade, much of which comes from Qatar. Nearly 70% of the crude oil passing through the waterway is destined for Asia, with China, India, Japan, and South Korea being major buyers.

Even a partial disruption on this scale immediately tightens global oil balances. Major consuming nations do not have ample inventories, and the spare capacity of OPEC+ — mainly concentrated in Saudi Arabia and the UAE — cannot completely compensate for a prolonged blockade if exports cannot pass through the Strait of Hormuz.

Analysts point out that Gulf producers had front-loaded shipments in anticipation of escalation, which might soften the initial impact. However, if tankers continue to avoid the region and insurance limitations persist, the physical shortage could worsen within days. The oil market is particularly sensitive to "prompt" supply — barrels available for immediate delivery — and this segment is now under severe strain.

Historical data indicates that oil prices can spike sharply during disruptions in the Strait of Hormuz. In previous tanker attacks in 2019, prices surged temporarily before stabilizing with the resumption of flows. However, the current situation is markedly different: an announced closure, widespread withdrawal of vessels, and a sharp decline in traffic volumes. If the blockade extends beyond a few weeks, the supply gap could widen significantly.

Several global banks and energy consultancies have cautioned that an extended shutdown could push Brent prices comfortably above $100 per barrel. In a severe scenario involving weeks of restricted flows and infrastructure damage, prices might test $110 to $120, especially if speculative trading exacerbates physical tightness.

Saudi Arabia and the UAE have pipelines bypassing the strait, but these routes cannot fully substitute for the volumes usually shipped through the Strait of Hormuz. On the other hand, redirecting tankers around the Cape of Good Hope adds weeks to delivery times, increases freight costs, and further constricts short-term supply. Shipping rates have already surged, and additional insurance premiums are adding thousands of dollars per voyage — expenses that eventually affect end-consumer fuel prices.

The surge in oil prices reflects not only lost supply but also growing uncertainty. Traders are now factoring in a higher likelihood of prolonged disruption rather than a brief standoff. Each additional day of limited traffic exacerbates the pressure.

While the United States is a net energy producer and less reliant on Middle Eastern imports compared to previous decades, it is still influenced by global price benchmarks. A sustained increase in Brent prices above $100 would inevitably raise US gasoline and diesel prices. Simultaneously, higher crude prices would benefit US shale producers, potentially leading to increased drilling if elevated prices persist.

The crucial variable is the duration of the closure. A brief shutdown followed by quick de-escalation could see prices retract to some extent. However, a blockade lasting several weeks — particularly with additional tanker incidents or infrastructure attacks — would accelerate the price surge and solidify expectations of oil prices reaching triple digits.

For now, markets are driven by momentum and concerns about tightening supply. With approximately one-fifth of the world's oil and significant gas flows essentially controlled by events in a narrow maritime passage, the closure of the Strait of Hormuz has turned geopolitical tensions into a potent catalyst for an escalating oil price surge that could soon reshape the global energy price landscape.