Bloomberg: Iran’s Hormuz Grip is tighter than ever after a month of war

Fire on Thai-flagged cargo ship Mayuree Naree in the Strait of Hormuz
Photo: Reuters

After a month of fighting, it is arguably Iran that has secured the most significant strategic victory — a tightening grip over traffic through the Strait of Hormuz, Bloomberg writes.

So far in March, the first full month of war, barely six vessels per day on average have traversed the narrow waterway connecting the Persian Gulf to the world, in either direction. That compares with about 135 a day in normal times, according to ship-tracking data compiled by Bloomberg.

Over that time, 80% of the small number of oil tankers exiting the strait have been Iranian — or belong to countries with which it is on cordial terms, the figures show.

Virtually all vessels that make the crossing now are doing so along Iran-approved routes — sailing close to its shores, and not to the Omani side of the strait — and often after talks to seek safe passage. Over the past few days, Malaysia and Thailand have reported bilateral deals to free tankers trapped in the gulf.

Ships with ties to Tehran make up a growing portion of tankers successfully leaving the Persian Gulf.

“Hormuz remains a closed gate for oil tankers,” said Anoop Singh, global head of shipping research at Oil Brokerage Ltd, adding the problem was not likely to see a quick fix without a ceasefire. “Even if there is one, it will not mean a rapid return of flows and shipping through Hormuz. Oil traders, refiners and supply-chain players are being forced to adapt.”

A toll ban for US and Israeli vessels from transiting the strait

Iran has now advanced a law introducing a toll and banning US and Israeli vessels from transiting the strait. The bill formalizes a system which multiple shipowners have already been reporting, as tankers are asked — through intermediaries — for detailed cargo and crew lists, and, in some cases, for payment. Perhaps as part of this move to normalize control, some interference with signals has begun to ease, a change that would help navigation in the area.

International maritime law — the UN Convention on the Law of the Sea — specifies that transit passage should be allowed through critical waterways including this one, which consists of overlapping Iranian and Omani territorial waters. But neither Iran nor the US have formally ratified UNCLOS.

Sovereignty over the waterway is one of Tehran’s five conditions for peace presented to the US.

Iran declared its control of the chokepoint immediately after US and Israel began strikes at the end of February, warning that no American vessel was allowed to enter the Persian Gulf. In early March, four ships with no clear ties to the US were hit by projectiles, resulting in at least three fatalities, rattling crews, shipowners and insurers.

An exceptionally effective asymmetric weapon in Iran’s fight against two of the world’s powerful military forces

The near-total closure of Hormuz, through threats and attacks, has proved an exceptionally effective asymmetric weapon in Iran’s fight against two of the world’s most powerful military forces. It gives Tehran a means of directly impacting global energy markets and of inflicting acute financial pain — in a way Washington has struggled to counter, despite floating options ranging from insurance support to naval escorts.

Iran exported roughly 1.8 million barrels a day this month, a nearly 8% increase from its average over 2025, according to figures from data intelligence firm Kpler as of March 26. That likely facilitated hundreds of millions of dollars of oil revenue for Tehran, a Bloomberg News analysis shows.

The impact of Iran’s control is visible in oil markets, with Brent is up close to 60% this month. It is also translating into diplomatic clout, especially with large oil-importing nations. Countries such as India, Turkey, Pakistan and Thailand have have sought Tehran’s approval to get ships through and alleviate a tight energy crunch.

Washington has been forced to make concessions

Even Washington has been forced to make concessions in order to cool prices, waiving sanctions on some seaborne Iranian oil. Buyers have been reluctant, given the risk of getting caught out as restrictions return — but India has taken its first Iranian LPG cargo in almost eight years.

Insurers are also seeing unprecedented disruption. Almost the entire Middle East is now designated as a war zone by the Joint War Committee, a London-based group of underwriters. As a result, rates to offer premiums for additional war-risk cover for ships in the Persian Gulf and Hormuz have shot up, with those in the gulf at around 1.5% of a vessel’s value, and those for the strait hitting at times 10%.

Tehran’s toll in theory offers a framework to get traffic moving. In practice, it underscores the reality that even an end to the war will not bring a return to the status quo ante. Many larger shipowners and insurers say they will also struggle to take up the option even if they wanted to, for fear of falling foul of US sanctions.

The Strait of Hormuz oil shock is now heading East and West

In conversations with more than three dozen oil and gas traders, executives, brokers, shippers and advisers over the last week, one message was repeated over and over: The world still hasn’t grasped the severity of the situation. Many drew parallels with the 1970s oil shock, warning a prolonged closure of the Strait of Hormuz would threaten an even bigger crisis. Fuel crunches hitting Asia will soon start spreading west, they said. Europe is likely to face surging prices to secure cargoes and is at risk of diesel shortages in the coming weeks, Bloomberg writes.

If the strait stays closed, the world will have to significantly reduce its oil and gas consumption — but not before prices spike to a level that forces consumers and businesses to fly, drive and spend much less. Already, demand has begun to drop, and some countries in Asia are hoarding and rationing fuel. US government officials and Wall Street analysts are starting to consider the prospect that oil prices might surge to an unprecedented $200 a barrel.

“It’s clear to me if this crisis lasts more than three or four months it becomes a systemic problem for the world,” Patrick Pouyanne, chief executive officer of TotalEnergies SE said at the CERAWeek conference in Houston. “We cannot have 20% of the crude oil, which is exported globally, stranded in the Gulf and 20% of the LNG capacity stranded, without any consequence.”

The market entered the war in a surplus

The market has been shielded by a number of supply buffers, but they are being depleted. A simple back-of-the-envelope calculation suggests the closure of the strait is reducing global oil flows by some 11 million barrels a day, after accounting for the interventions so far aimed at offsetting the loss. When compared with pre-war demand levels, that leaves a roughly 9 million-barrel shortfall — a yawning gap that is more than the oil consumption of the UK, France, Germany, Spain and Italy combined. Lower demand, particularly in Asia, is already helping to force a closing of that gap.

The market also entered the war in a surplus.

The situation is even more extreme in liquefied natural gas. The Strait of Hormuz typically accounts for about a fifth of global supply, with the final cargoes on the way from the Middle East now about to arrive at their destinations. Unlike in oil, there are no alternative routes to get the gas to market and very few strategic stockpiles to cushion the shortfall.

At $170 a barrel, the impact on inflation and growth roughly doubles

But if the Strait of Hormuz stays closed too far into the second quarter, the risk is that oil prices move sharply higher. At $170 a barrel, the impact on inflation and growth roughly doubles — a stagflationary shock that could shift everything from the path ahead for central banks to the outcome of the US midterm elections.

Governments are also beginning to take steps to proactively reduce demand. The International Energy Agency has published guidance on measures to shelter consumers from the biggest impact of the crisis, including remote working and greater use of public transport. Some nations have already started taking action — the Philippines has begun a temporary four-day week.

The merits of another stockpile release were also raised at a recent European Union energy taskforce meeting, according to a person familiar with the matter, although some countries argued that such a move should be reserved for when actual physical disruptions emerge, rather than for price management. And it’s unclear if further releases would actually boost the amount of oil on the market or simply mean that discharges carried on for longer.

Problems have begun all over the world

Pakistan has told cricket fans to watch games from home to preserve fuel. There are shortages in Thailand, while hundreds of gas stations in Australia have reported fuel shortfalls and carriers have canceled flights from Vietnam to New Zealand. A handful of Asian nations, including China — the world’s biggest crude oil importer — are curbing exports. South Korea has announced a five-month restriction on the export of naphtha, a fuel that helps make petrochemicals and gasoline.

In Singapore, marine fuel prices are so high that buyers are reluctant to purchase more than they absolutely need and sellers don’t want to offload large volumes in case the scarcity continues and they run out of barrels to honor forward commitments.

As the crisis spreads, parts of Africa have already faced supply disruptions, and governments are implementing measures to reduce consumption.

Now, some in the industry are warning that Europe is heading toward scarcity pricing — particularly highlighting diesel, the lifeblood of the global economy. Several traders and analysts said that the region faces supply shortages within the coming weeks if the Strait of Hormuz is not reopened, with similar pressures also expected in Latin America.

If the strait remains closed for a second month, traders and analysts say they expect global energy markets will quickly evolve into a fight for supplies, driving up prices and benefiting buyers and countries that are able to outbid others.

“For as long as Hormuz remains closed, both oil and gas markets don’t balance,” said Aldo Spanjer, head of energy strategy at BNP Paribas. “The significant demand destruction we would require to balance oil and gas markets in a sustained Hormuz outage, will require significantly higher prices than today.”

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