World Braces For Potential Energy Shock

There are several important energy chokepoints around the world, but none is more significant and vulnerable than the Strait of Hormuz. Now, following the U.S. bombing of Iranian nuclear facilities on Saturday, the Iranian Parliament has reportedly voted to close this important energy transit chokepoint. Such a move could severely disrupt the world’s energy markets.

While the final decision still rests with Iran’s Supreme National Security Council–and Iran has failed to follow through on previous threats to close the Strait–the vote signals intent to weaponize one of the world’s most economically sensitive maritime corridors. If carried out, the consequences would be swift, severe, and global.

Let’s take a closer look at how we got here—and why the stakes are so high.

Background

On June 21, the United States launched coordinated airstrikes on Iranian nuclear facilities at Fordow, Natanz, and Esfahan. The strikes marked the most serious U.S.–Iran escalation in over a decade. The campaign featured B-2 stealth bombers and submarine-launched Tomahawk missiles.

In his remarks following the strike, President Trump struck a conciliatory tone, stating, “Now is the time for peace.”

Iran, unsurprisingly, interpreted it differently. Within hours, the Iranian parliament voted to close the Strait of Hormuz—a move the U.S. would certainly interpret as a major escalation.

Secretary of State Marco Rubio told Fox News, “If they do that, it will be another terrible mistake. It’s economic suicide for them if they do it. And we retain options to deal with that, but other countries should be looking at that as well. It would hurt other countries’ economies a lot worse than ours.”

Why the Strait of Hormuz Matters

The accompanying picture illustrates why the Strait of Hormuz is so vital. At just 21 miles wide at its narrowest point–and significantly bordered by Iran–the Strait of Hormuz handles the transit of nearly 20% of global oil supply. But that’s only part of the story. It is also a critical artery for liquefied natural gas (LNG) transit. Many important energy-producing countries rely on the Strait of Hormuz to get these products to market.

There are three major global LNG producers, each with about 20% of the global market: The U.S., Qatar, and Australia. Qatar ships around 77 million metric tons of LNG annually, most of it passing through the Strait. Its customers include energy-hungry economies such as Japan, South Korea, China, and India, as well as parts of Europe. If Qatar is cut off, those nations lose part of their energy supply almost overnight.

And LNG isn’t as fungible as oil. While oil can be rerouted and drawn from strategic reserves, LNG infrastructure is far more rigid. Ships must be able to dock at specially equipped terminals, and production and liquefaction aren’t easily shifted. The LNG market is fragile, and supply shocks can ripple fast and violently.

Consequences of a Closure

If Iran follows through with closing the Strait of Hormuz, the impact on global energy markets would be immediate and far-reaching.

Energy prices would spike across the board. Oil could surge past $90 per barrel, and LNG spot prices—particularly in Asia and Europe—could return to levels not seen since 2022. For countries that rely heavily on imported natural gas, the consequences would be renewed inflation, worsening energy insecurity, and even the possibility of fuel rationing as winter approaches.

Shipping and insurance markets would be thrown into disarray. Tanker traffic through the Persian Gulf would grind to a halt. Maritime insurers may suspend coverage for vessels transiting the Strait or demand prohibitively high war-risk premiums. Some shipping companies would avoid the region altogether, forcing longer routes and tighter global shipping capacity—raising costs not just for energy, but for commodities and consumer goods across the board.

Strategic petroleum and gas reserves would likely be tapped as immediate substitutes. Countries like Japan, South Korea, and India—heavily dependent on Persian Gulf energy flows—would be among the first to draw from their stockpiles. But those reserves are limited, and a prolonged closure of the Strait would quickly strain their ability to buffer continued supply disruptions.

Broader economic consequences would follow. As energy prices rise, so do input costs for key sectors like transportation, chemicals, and heavy manufacturing. Inflation would reaccelerate globally, putting renewed pressure on central banks and undermining recent progress in stabilizing prices. Some emerging economies, which lack the finances to subsidize rising energy costs, would be hit hardest, but developed economies would feel the squeeze too.

Finally, a sustained disruption would accelerate the global energy realignment already underway. Policymakers would move quickly to diversify energy sources—fast-tracking LNG terminals, expanding storage capacity, and increasing imports from more stable suppliers like the U.S. It would also strengthen the case for more long-term investments in nuclear power and renewables, both of which offer insulation from the geopolitical volatility that continues to define fossil fuel markets.

A Risky Game

Closing the Strait would also damage Iran’s own economy, which relies heavily on maritime exports. But history shows that governments under pressure don’t always act rationally—especially when nationalism and survival are in play.

Tehran may view the closure as a way to rally domestic support, push back against the West, or extract concessions in future negotiations. But it is a high-stakes move with no easy exit.

The U.S. has made clear that such an act would be seen as hostile—and not just by Washington. Many of the world’s major economies have a vested interest in keeping the Strait open, and a multinational response is more than likely.

Bottom Line

The world is watching closely. Energy companies are reviewing contingency plans, and governments are dusting off emergency protocols. Even in the absence of direct military escalation, the growing geopolitical risk is already being priced into oil and LNG futures.

But it’s worth noting that the Strait of Hormuz has never been fully closed in modern history—not even during periods of intense regional conflict. The closest call came during the Iran–Iraq War of the 1980s, particularly during the “Tanker War,” when both countries targeted commercial shipping and laid mines throughout the Persian Gulf. Despite the violence, the Strait remained open—albeit under heavy military escort and with soaring insurance costs.

Iran has issued similar threats before—most notably in 2011–2012 and again in 2019—in response to sanctions and military pressure. In each case, the threat alone was enough to shake global energy markets, even without an actual blockade.

This time may be no different. But markets are rightly on edge, because the Strait of Hormuz isn’t just a shipping lane—it’s a pressure point for the entire global economy. And right now, that pressure is building.