Strait of Hormuz Closure Triggers Global Oil and Gas Supply Shock in 2026
Global oil and gas markets face severe disruption after Iran effectively closed the Strait of Hormuz on 1 March 2026. The move followed US and Israeli airstrikes on 28 February, cutting off nearly 20% of the world's oil and liquefied natural gas (LNG) supplies. Only tankers allied with Iran or select partner nations like Iraq can now pass, sending prices soaring and forcing ships to take longer, costlier routes.
The Strait's closure has halted most commercial traffic, leaving tanker insurance in collapse and key infrastructure damaged. Physical volumes remain offline, with no quick return expected for some supplies. Alternative routes are now in heavy use: vessels heading between Europe and Asia must detour around the Cape of Good Hope, adding 10 to 14 days to journeys. This reduces shipping capacity and drives up freight and insurance costs. Saudi Arabia has redirected some oil through its East-West Pipeline to the Red Sea, while Oman is bypassing the strait for LNG exports.
Global oil prices continue to swing wildly, with markets bracing for prolonged disruptions. The International Energy Agency's latest report highlights growing recession fears as energy costs climb. Meanwhile, tax policies are shifting unpredictably, with governments pulling in different directions. Energy security concerns, new BEPS 2.0 tax rules, and debates over windfall levies are adding to the complexity. Businesses now face uncertainty over effective tax rates, requiring multiple planning scenarios rather than a single base case.
The oil market's supply shock is real, not just driven by speculation. With the Strait of Hormuz still blocked, prices above $100 per barrel and multi-quarter disruptions are likely. Companies relying on outdated risk assessments may find their strategies ill-prepared for the current volatility.
