Blockade of the Strait of Hormuz: loss of 400 million barrels and 31% price jump – a global shock

The future of the global economy often hangs by a thread, stretching across one of the world’s narrowest and most important sea arteries. The Strait of Hormuz, a small stretch of water between Iran and Oman, is a veritable artery, pulsing with millions of barrels of oil every day. When dire predictions emerge of its “double blockade,” as Bloomberg reported, the world holds its breath. This is not just a stock market crash; it is a scenario that could redraw the geopolitical map, challenge energy security, and trigger a global economic crisis that could potentially cost the world economy 400 million barrels of oil and send prices soaring by a staggering 31%. These are not just numbers—they are the harbingers of a chain reaction that threatens to stall the engine of global progress.

The Deadly Route of World Trade: Why the Strait of Hormuz is the Heartbeat of the Planet

The Strait of Hormuz, which connects the Persian Gulf with the Arabian Sea and the Indian Ocean, is not by chance called one of the most strategically important waterways on the planet. Its width at its narrowest point is only about 39 kilometers ¹, but approximately 20-25% of the world's oil passes through it every day ², which is about 17-21 million barrels. This makes it critical to the energy security of giants such as China, India, Japan, South Korea and the European Union, which are heavily dependent on Middle Eastern oil and liquefied natural gas (LNG) transported through this route. The uninterrupted flow of oil and gas through Hormuz supports global supply chains, powers industry, provides transportation and heat for billions of people.

The history of the strait is closely intertwined with periods of geopolitical tension. During the Iran-Iraq War of the 1980s, known as the “tanker war,” both sides attacked oil tankers passing through Hormuz in an attempt to undermine each other’s economies. ³. This conflict has vividly demonstrated the vulnerability of global shipping and the ability of regional conflicts to quickly escalate to global proportions. Recent incidents, including attacks on tankers and ship seizures attributed to Iran, only underscore the ongoing instability and high stakes involved in the security of this passage. ⁴Each such case is immediately reflected in global markets, causing nervous price fluctuations and forcing analysts to model worst-case scenarios.

The “Double Blockade” Scenario: What the Loss of 400 Million Barrels Means

The term “double blockade,” as used in the Bloomberg report, carries profound and threatening implications. While a “single” blockade might mean temporarily obstructing shipping, a “double” blockade implies a more comprehensive, long-term, and effective mechanism for blocking shipping lanes. This could include not only physical naval blockades or mining, but also cyberattacks on navigation systems, attacks on oil production and export infrastructure in the region, and the use of political and economic pressure to completely shut down traffic. The scenario considered by Bloomberg likely describes a situation where oil exports from the Persian Gulf are virtually completely halted for an extended period, perhaps due to an escalation of a regional conflict or through deliberate actions aimed at disrupting the global energy balance. ⁵.

The loss of 400 million barrels of oil, as Bloomberg predicts, is a colossal blow to the global economy. To understand the scale of this figure, it is worth noting that the International Energy Agency (IEA) estimates total global oil demand in 2024 at about 103,2 million barrels per day. ⁶. So 400 million barrels is about four days of global consumption. But it’s not just four days without oil. It means that the reserves that could supply that much oil will be depleted, and the ability to replenish them will be limited. Such a loss creates an immediate shortage in the market that cannot be quickly replaced by other sources or strategic reserves.

The loss of that much oil would force importing countries to seek alternative sources that are either more expensive or unavailable in the quantities needed. This would trigger a panic in futures markets, lead to speculative price hikes, and put enormous pressure on global economies already feeling the effects of inflation and slowing growth. Possible consequences include factory shutdowns, fuel shortages for transportation, rising prices for everything from food to manufactured goods, and ultimately a global economic recession. ⁷.

Oil Markets on Fire: How the Price Soared 31% and More

A 31% increase in oil prices in the event of a “double blockade” of Hormuz is not just a number, but a forecast of catastrophic consequences for world markets. A price shock of this magnitude could exceed even those observed during the oil crises of the 1970s or during the Russian invasion of Ukraine in 2022. At that time, Brent prices reached over $120 per barrel, and now we are talking about a potential increase that could push prices well above $150 per barrel, and perhaps even to new historical highs. Such an increase is caused not only by shortages, but also by panic in the markets, where speculative investors and companies seek to secure supplies, which further inflates prices ⁸.

This will have several layers of impact. First, the cost of transportation will increase exponentially. Airlines, shipping companies and road transport will face a sharp increase in fuel costs, which will lead to higher tariffs and, ultimately, to higher prices for all goods transported. Second, this will directly affect production costs. Industries that use oil and its derivatives as raw materials (e.g. chemicals, pharmaceuticals, plastics) will experience a significant increase in costs, which will be passed on to the end consumer. Third, national budgets will suffer. Importing countries will face higher costs for purchasing oil, which can lead to balance of payments deficits and depletion of foreign exchange reserves. ⁹On the other hand, oil-exporting countries may enjoy temporary surplus profits, but they too will feel the effects of a global recession as demand for their products may decline in the long term.

The consequences of such a price jump will extend far beyond the energy sector, affecting consumers around the world. Rising gasoline and diesel prices will reduce the purchasing power of households, forcing them to cut other expenses. This could lead to a significant drop in consumer demand, one of the key factors in economic growth. Thus, the 31% jump in oil prices is not just a change in quotations, but a harbinger of possible global stagflation: a situation where high inflation is combined with economic stagnation ¹⁰.

Chain Reaction: Global Economy on the Brink of Recession

The loss of 400 million barrels of oil and a 31% price increase are just the tip of the iceberg of a potential global economic recession. The real consequences of a “double blockade” of Hormuz will be much deeper and more multifaceted. The main mechanism is the transmission of the shock through inflation. A sharp increase in energy prices will lead to inflation in all sectors of the economy. The cost of production, transportation, logistics - everything will increase. Central banks, in response to rising inflation, will likely be forced to raise interest rates, which will make loans more expensive and slow economic growth, especially in developing countries that are already burdened with debt ¹¹.

The most vulnerable will be countries that are heavily dependent on oil imports, such as Japan, South Korea, India, and the European Union. These economies will face a significant deterioration in their trade balance as energy costs rise sharply. Their industrial sectors, which are the main engines of growth, may face raw material shortages or rising costs, leading to reduced production and job losses. For example, German industry, the engine of the European economy, is heavily dependent on imported energy, and any significant jump in prices could slow it down. ¹².

Small and medium-sized businesses, which often operate on low margins, will be particularly hard hit by rising costs. Many businesses may be forced to scale back operations or even close, leading to mass layoffs. This, in turn, will reduce consumer demand and deepen the recession. Stock markets will react by falling as investors flee riskier assets and seek refuge in safe havens such as gold or government bonds from stable economies. ¹³.

In addition, the crisis could lead to a significant increase in geopolitical tensions. Countries could start competing for the limited resources that remain, which could trigger new conflicts or deepen existing ones. The humanitarian consequences would also be significant: rising food prices, caused by rising transport and production costs, could exacerbate poverty and hunger in the world's poorest regions.

Geopolitical Risks and the World's Response: From Military Patrols to Diplomatic Battles

The scenario of a “double blockade” of Hormuz is not only an economic, but also, above all, a geopolitical crisis. This region is a hot spot of constant tension, where the interests of major world powers and regional players intersect. Iran, which controls the northern coast of the strait, has repeatedly threatened to block this waterway in response to sanctions or military action ¹⁴. These threats are not empty words; the Iranian navy, the Islamic Revolutionary Guard Corps (IRGC), has the means to do so, including anti-ship missiles, mines, torpedo boats, and submarines. Any attempt to carry out such a threat would inevitably lead to direct military conflict.

In contrast, the US and its allies, including the UK, France and other countries, have a significant military presence in the region, with the US Navy's Fifth Fleet based in Bahrain. ¹⁵. Their mission is to ensure freedom of navigation and protect commercial routes. In the event of a blockade scenario, the international community's response will be swift and decisive, likely including military operations to unblock the strait. This risks turning the region into a full-scale conflict zone, with unpredictable consequences for global security.

In addition to the military aspect, diplomatic efforts will play an important role. The United Nations, international organizations and leading countries of the world will immediately engage in attempts to de-escalate and find a peaceful solution. However, the effectiveness of such efforts will depend on the depth of the conflict and the willingness of the parties to compromise. Historical precedents, such as the tanker hijacking incidents or the attacks on oil facilities in Saudi Arabia, show how fragile the balance of power in the region is and how easily regional stability can be disrupted ¹⁶.

The crisis in the Strait of Hormuz will also have consequences for relations between the Gulf states. Saudi Arabia, the UAE and Qatar, which are heavily dependent on exports through Hormuz, will be forced to look for additional ways to protect their interests and, possibly, reconsider their foreign policy. Growing instability could lead to further militarization of the region and an intensification of the arms race. This is a complex web of relationships, where any wrong move can have far-reaching and irreversible consequences.

Finding Detours: Myths and Reality of Alternative Routes

Given the critical vulnerability of the Strait of Hormuz, the question of alternative routes for transporting oil and gas is becoming vital. Some Gulf countries, aware of these risks, have already invested in building pipelines that would bypass the strait. For example, Saudi Arabia has the East-West Pipeline (Petroline), which extends to the Red Sea. ¹⁷, allowing some oil to be exported without passing through Hormuz. The United Arab Emirates also built the Abu Dhabi–Fujairah Oil Pipeline, which runs to the Gulf of Oman, providing an alternative route for their oil. ¹⁸.

However, these alternative routes, while important, have significant limitations. First, their capacity is significantly smaller than the volume of oil passing through the Strait of Hormuz. The combined capacity of all existing pipelines bypassing Hormuz is only about 6-7 million barrels per day. ¹⁹, while three times as much passes through the Strait. This means that if Hormuz were completely closed, most of the region's oil would simply not be able to reach world markets.

Second, these pipelines themselves are objects of increased vulnerability. They pass through sovereign territories, potentially being targets for attack or sabotage, especially in the context of regional conflict. In addition, not all countries exporting oil from the Persian Gulf have such alternatives. For example, Kuwait, Iraq and Qatar are almost entirely dependent on the Strait of Hormuz for their oil and LNG exports. ²⁰.

The Strategic Petroleum Reserve (SPR) is another element of the crisis response. The United States, as well as countries in Europe and Asia, maintain significant stocks of crude oil and petroleum products for use in the event of a major supply disruption. However, these reserves are intended to stabilize the market in the short term and cannot compensate for the long-term loss of 400 million barrels. It is estimated that the world’s strategic petroleum reserves can only meet demand for a few weeks or months, depending on the extent of the crisis. ²¹. In a “double blockade” scenario, they would only be enough to delay the inevitable. Thus, while alternative routes and strategic reserves are important mitigation tools, they are not capable of fully protecting the global economy from the devastating impact of a prolonged closure of the Strait of Hormuz.

Energy Transformation Under Pressure: Lessons from Fragility

The “double blockade” scenario of Hormuz is a stark reminder of the fragility of the current global energy system and the urgent need to accelerate energy transformation. For decades, countries have focused on the availability and affordability of fossil fuels, often ignoring geopolitical risks and environmental consequences. This hypothetical crisis highlights that energy security is inextricably linked to diversifying energy sources and reducing dependence on unstable regions.

In the short term, such a crisis could even trigger a temporary return to fossil fuels, as countries desperately seek any available energy sources to keep their economies running. Oil and gas production could increase in North America, the North Sea, and other less risky regions, as well as the use of coal. ²². In the long term, however, this shock will be a powerful catalyst for an accelerated transition to renewable energy sources – solar, wind, geothermal and hydropower. Governments and corporations will realize that investing in “green” technologies is not only a matter of ecology, but also a matter of national security and economic sustainability.

The crisis will push for the development and implementation of innovative solutions in the field of energy conservation, increasing efficiency and developing local energy systems that are less vulnerable to external shocks. ²³. Research into nuclear energy is intensifying, as well as alternative fuels such as hydrogen. There will also be increased interest in developing energy storage technologies and building “smart” energy grids that can adapt to changing conditions. Thus, while a “double blockade” of Hormuz could cause immense pain to the global economy, it could also be the bitter pill that forces humanity to finally abandon its fragile dependence on fossil fuels and move towards a more sustainable and secure energy future.

The future of the Strait of Hormuz: between security and constant threat

The Strait of Hormuz will remain a key geopolitical and economic arena in the coming decades. Its narrowness and strategic location make it an integral part of global energy flows. Despite all efforts to diversify and transition to renewable sources, the world will remain dependent on oil and gas, significant volumes of which pass through this strait. Therefore, the issue of Hormuz security will remain a priority for world leaders and military strategists.

Tensions in the region are unlikely to disappear. They are the result of a complex web of historical, religious, political, and economic contradictions that are constantly fueled. There are deep divisions between Iran and Saudi Arabia, Israel, and other regional players. A permanent international naval presence in the region is necessary to deter potential aggressors and protect shipping. However, this presence is also a source of friction and potential escalation.

The ability of the international community to prevent scenarios like the “double blockade” of Hormuz will depend on the effectiveness of diplomacy, the ability to take collective action, and the willingness to resolve conflicts peacefully. Increasing sanctions, which often backfire, or military displays of force can be risky if they are not accompanied by a thoughtful de-escalation strategy and open channels of communication. ²⁴The future of Hormuz is a mirror of the future of global security: it requires constant vigilance, a balanced approach, and the awareness that any local conflict in this strategic location could have global consequences that would be felt on every continent.

Sources

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