Hormuz Is Half-Open and Still Breaking the World Economy

The most dangerous phrase in this crisis is “the Strait is still open.” It sounds reassuring. It is not.

A maritime chokepoint does not fail like a bridge, with a clean before-and-after moment. It fails when shipowners stop sending crews, insurers stop pricing risk at usable levels, ports cannot plan cargoes, and navies become the traffic managers for what used to be commerce. That is where the Strait of Hormuz now sits. Iran’s claim that it has closed the waterway may overstate its physical control, but the operational reality is severe: the world’s most important energy corridor is no longer a normal commercial route.

The Strait of Hormuz is the narrow passage between Iran and Oman that links the Persian Gulf to the Gulf of Oman and the open ocean. In ordinary times, it is less a place than a habit: tankers leave Saudi Arabia, Iraq, Kuwait, Qatar, the United Arab Emirates and Iran, then funnel through the strait into global markets. In 2025, about 20 million barrels per day of crude oil and refined products moved through Hormuz, around a quarter of world seaborne oil trade, and about 80 percent of those flows went to Asia, according to the International Energy Agency¹. The same passage also carried about 19 percent of global LNG trade. LNG means liquefied natural gas, gas chilled into liquid form so it can be shipped on specialized tankers.

My view is blunt: the world can absorb a Hormuz disruption only in the narrow sense that civilization does not stop and the 1970s do not replay perfectly. But a meaningful, durable disruption is not a manageable scare. It is already a global economic and military crisis, and the evidence points toward a hard truth: partial passage is not resilience if the system cannot move energy predictably at scale.

Start with the ships. Iranian declarations matter less than traffic data. The best public data shows leakage, not normality. The Associated Press, citing Lloyd’s List Intelligence and Kpler, reported that at least 89 ships crossed Hormuz between March 1 and March 15, including 16 oil tankers, but that was down from roughly 100 to 135 vessel passages per day before the war; Kpler also estimated Iran had exported well above 16 million barrels of oil after early March, much of it bound for China despite sanctions risk, according to AP’s March reporting². A later AP account said overall traffic had fallen by 90 percent and only about 150 vessels had transited since March 1, a little more than one normal prewar day, according to Lloyd’s List data cited by AP³.

That is not a closed door. It is a checkpoint. And checkpoints are poison for global supply chains.

S&P Global’s latest detailed market assessment is even more damning. Before the U.S. and Israel war with Iran began on February 28, S&P said more than 100 vessels and around 20 million barrels of crude and refined products moved through Hormuz daily; by late May, total traffic had fallen to an average of 11 vessels and fewer than two tankers per day, more than 90 percent below prewar norms, according to S&P Global Commodity Insights⁴. That same assessment found February traffic averaged roughly 135 vessels per day, including about 54 oil, chemical and LPG tankers and about six LNG carriers per day, while March fell to just seven vessels per day and April recovered only to 14 vessels per day. When a market that needs repetition gets exceptions, the practical result is paralysis.

Insurance is the hinge. War-risk insurance is the extra coverage shipowners buy when a voyage enters a conflict zone. It is not a side cost. It is permission from the market to sail. S&P reported that war-risk premiums for Hormuz routes surged by more than 1,000 percent after the war began, rising from prewar ranges of 0.1 to 0.3 percent of hull value to 2.5 to 5 percent after attacks on vessels; for a typical very large crude carrier worth $100 million to $150 million, that meant $2.5 million to $7.5 million per voyage, according to S&P’s freight-market assessment⁴. Premiums later eased, but S&P still found that more than 800 vessels remained stranded in the Middle East Gulf and that repeated short “open” windows followed by new attacks had created a credibility gap.

This is where the optimistic case breaks. Yes, Saudi Arabia and the UAE can move some crude around Hormuz through pipelines. The IEA estimates 3.5 million to 5.5 million barrels per day of available alternative capacity through Saudi routes to the Red Sea and the UAE pipeline to Fujairah, according to the IEA’s Hormuz factsheet¹. That is real. It matters. But it is not close to replacing roughly 20 million barrels per day of oil and product flows, and it does not solve the gas problem. The IEA says about 93 percent of Qatar’s LNG exports and 96 percent of UAE LNG exports transit Hormuz, representing 19 percent of global LNG trade, with a closure stranding those volumes.

This is why Asia is so exposed. China and India together received 44 percent of crude exports passing through Hormuz in 2025, while Japan and Korea are especially reliant among IEA countries, according to the IEA¹. Europe gets far less crude directly through the strait, but energy markets are global: a missing Asian cargo can bid away Atlantic supply, and LNG scarcity in one basin shows up in power prices elsewhere.

The United States and its allies do have buffers. The International Energy Agency announced on March 11 that its 32 member countries would make 400 million barrels of emergency oil available, the largest stock release in the agency’s history, according to the IEA⁵. A strategic petroleum reserve is exactly what it sounds like: government-held emergency oil meant to soften shocks when private supply breaks. But reserves are a clock, not a cure. They buy time for repair, rerouting, diplomacy and demand cuts. They do not reopen a sea lane.

The macroeconomic damage is already visible enough to reject complacency. The World Bank projected in April that energy prices would surge 24 percent in 2026 to their highest level since Russia’s 2022 invasion of Ukraine, citing attacks on infrastructure and shipping disruptions in Hormuz, according to its Commodity Markets Outlook release⁶. The IMF warned in March that large energy importers in Asia and Europe were bearing the brunt of higher fuel and input costs and that sustained oil-price spikes historically push inflation higher and growth lower, according to an IMF analysis⁷. This is not the 1973 Arab oil embargo in structure, but it rhymes in politics: energy shocks punish consumers, force central banks to choose between inflation and growth, and make elected leaders impatient for military shortcuts.

The military shortcut is not short. The U.S. Navy can escort ships. Gulf states can help. Mine-clearing units can work. But those tools turn commerce into a rolling combat operation. The U.S. Maritime Administration’s active advisory says Iran continues to threaten and conduct strikes on commercial vessels in the Persian Gulf, Strait of Hormuz and Gulf of Oman, and lists risks including missile attacks, armed drones, unmanned surface vessels, small boats, helicopters, forced diversion, and heavy GNSS jamming or spoofing, according to MARAD advisory 2026-004⁸. GNSS is satellite navigation, the plumbing behind GPS-style positioning. If that is unreliable in a narrow, crowded, mined waterway, “open” becomes a legal fiction.

The International Maritime Organization, the UN agency for shipping, has been unusually stark. Its secretary-general said on April 24 that there was “no safe transit anywhere in the Strait of Hormuz,” and the IMO said it had verified 29 attacks on vessels around the Gulf and Hormuz since the beginning of the conflict, with at least 10 seafarers killed and around 20,000 seafarers on about 1,600 vessels remaining in the Gulf, according to the IMO⁹. S&P reported that 10 ships transited on May 4 after the U.S. escort plan began, little changed from pre-escort levels and less than 10 percent of prewar traffic, while the IMO said naval escorts were not a sustainable long-term solution, according to S&P Global¹⁰.

History offers a warning, not comfort. During the Tanker War, the 1980s phase of the Iran-Iraq War in which Gulf shipping became a target, the United States launched Operation Earnest Will to escort Kuwaiti tankers. The U.S. Naval History and Heritage Command describes it as the largest naval convoy operation since World War II, and its account notes that the first convoy included the tanker Bridgeton, which struck an Iranian mine on its way to Kuwait, according to the Naval History and Heritage Command¹¹. The lesson is not that escorts fail. The lesson is that escorts succeed slowly, with risk, retaliation and luck.

That risk is current, not theoretical. CENTCOM said Iranian forces launched multiple missiles, drones and small boats as three U.S. guided-missile destroyers transited Hormuz on May 7, and that U.S. forces intercepted threats and struck Iranian missile, drone, command and intelligence nodes, according to U.S. Central Command¹². Reuters reported that U.S. forces struck Iranian coastal radar sites on June 6 after shooting down drones launched toward the strait, while Iran said the U.S. action violated the April 8 ceasefire and claimed it fired at tankers trying to cross without permission, according to Reuters via MarketScreener. On June 11, AP reported a second consecutive day of U.S. strikes on Iran, with Tehran firing back at Gulf states and Jordan and insisting it would maintain its chokehold on Hormuz, according to AP¹⁴.

The counterargument deserves respect. Hormuz is not hermetically sealed. Some ships have crossed. Iran still wants its own oil revenue. Saudi and UAE pipelines blunt the crude shock. Emergency reserves are large. Markets adapt faster than politicians think. All true.

But that argument treats leakage as proof of resilience. I think that is the wrong standard. A global energy corridor is functional when a Japanese utility, an Indian refiner, a Korean petrochemical firm or a European trader can schedule cargoes without needing Iranian permission, U.S. naval protection, extraordinary insurance, and a prayer that the next ceasefire window lasts longer than the last one. By that standard, Hormuz is not meaningfully open.

Diplomacy is stuck on the same problem. Al Jazeera reported in May that Iran sought a staged deal through intermediaries that would end the war, lift the U.S. blockade, release frozen assets, remove sanctions and create a new mechanism governing Hormuz while deferring nuclear talks; Washington’s objection was that opening the strait cannot mean normalizing tolls or Iranian coordination for passage, according to Al Jazeera¹⁵. Hezbollah, the Iran-aligned Lebanese militia and political movement, matters here because any regional deal that ignores Iran’s proxy network risks another front reopening even if Hormuz quiets for a week.

The indicator to watch is not whether Iran says the strait is open. Watch whether S&P, Lloyd’s List or Kpler show at least 70 percent of prewar tanker and LNG carrier traffic for 60 straight days, with war-risk premiums back near commercially tolerable levels and no recurring U.S.-Iran exchanges at sea. My prediction: absent a written U.S.-Iran arrangement that explicitly protects non-vetted commercial passage, Hormuz will remain below half its prewar energy throughput through the summer, and the world will keep discovering that a half-open chokepoint is enough to export inflation, fear and war risk everywhere.