Following the escalation of US Israel/Iran conflict that has raised the risk of disruption in the Strait of Hormuz, which handles approximately 15 - 20% of globally traded crude and major LNG flows;
Jaison Davis, Economic Research Analyst at GlobalData, a leading intelligence and productivity platform, commented:
“Markets are pricing in the threat: Brent and WTI spiked approximately 10 - 13%, with prices now driven more by shipping security and vessel availability than upstream supply. The market is treating this as a logistics shock, not a production shock. Even with spare capacity in the GCC, barrels are only ‘real’ when they can be lifted and delivered. Tanker rerouting, port disruptions, and vessel queues can tighten prompt supply quickly, amplifying volatility and pushing crude higher even without sustained outages."
“GCC exposure varies. Saudi Arabia and the UAE can divert some exports via pipelines and terminals outside Hormuz (e.g. to Fujairah), but capacity is limited and prone to bottlenecks, so it can’t fully replace seaborne flows. Bahrain, Kuwait, and Qatar rely heavily on Hormuz and are most exposed.
“Smaller Gulf states are staring at a volume problem, not just a price problem. Higher oil prices can support revenues, but if exports are delayed or curtailed, fiscal balances deteriorate quickly. A month-long severe disruption could widen deficits by 1 - 3% points of GDP in several exporters, with Bahrain, Kuwait, and Qatar most vulnerable."
“Near-term risks are shifting downstream: storage limits at Bahrain’s Sitra refinery, possible disruption at Kuwait’s Shuaiba petrochemical hub, and safety-driven evacuations near Oman’s Khasab port show how quickly refining, petrochemical supply chains, and ports can be hit. Output hikes, like Saudi +206 000 bpd, matter little if shipping is constrained.
“Downstream assets are the first to feel real-world disruption: storage fills, feedstock deliveries slip, and safety protocols restrict throughput. When refineries and petrochemical sites slow, the economic hit extends beyond crude, into fuels, plastics, and industrial inputs, creating broader inflationary pressure and supply-chain uncertainty across regional trade routes.
“Qatar’s LNG is a key flashpoint: all cargoes pass through Hormuz, and major Asian buyers (Japan, South Korea, India) rely on steady supply. A prolonged delay or closure would likely spike Asian spot LNG prices amid tight supply and high freight, feeding global energy inflation and making US$100+ oil plausible."
“LNG markets have less flexibility than oil in the short run. If Qatar’s cargos are delayed, Asian buyers face immediate replacement risk, bidding up spot prices and freight. That feeds into electricity costs, industrial margins, and headline inflation across importing economies – turning a regional security event into a global macro shock."
“War-risk insurance is rising in parallel and is itself becoming a constraint. Premiums reportedly up as much as 50% would lift per-voyage costs materially, for a US$100 million VLCC, roughly US$250 000 to nearly US$400 000 per transit, raising delivered prices and deterring marginal sailings even without closure."
“If Hormuz stays open but threatened, expect sustained volatility, high risk premiums, and intermittent supply squeezes. A de facto or formal closure would force abrupt diversion to limited bypass routes and amplify price spikes. Outcomes hinge on three variables: whether Iran declares a blockade, how much volume can reroute via alternative pipelines/ports, and the duration and intensity of maritime and missile threats. Stakeholders should stress-test logistics, update contractual risk pricing, and prepare for sustained oil and gas price instability.”