Introduction
The Middle East has entered one of its most volatile phases in years. A major U.S.–Israeli military campaign against Iran, triggered by prolonged tensions over Tehran’s nuclear program, regional ballistic missile threats, and repeated proxy attacks, has escalated into wide-ranging conflict across the region. Iran’s leadership, including its Supreme Leader, has been struck, prompting retaliatory missile and drone attacks on U.S. allies throughout the Gulf and even strikes on diplomatic missions in the region.
The Strait of Hormuz: A Chokepoint in Crisis
The Strait of Hormuz, a narrow channel between Iran’s southern coast and Oman that connects the Persian Gulf to the Gulf of Oman and Arabian Sea, is one of the world’s most strategic maritime oil routes. Roughly 20 % of global oil supply and significant volumes of liquefied natural gas (LNG) transit through it daily.
During the recent escalation:
- Iran’s Revolutionary Guard publicly declared the strait “closed” and threatened to open fire on any commercial vessel that attempted transit, a move that, if acted upon, could halt a fifth of daily global oil flows.
- Shipping traffic has plummeted virtually to zero as tankers avoid the route, and over 150 commercial vessels are anchored or staying put due to safety concerns and withdrawal of insurance cover.
- Marine insurers have canceled or sharply raised war-risk premiums for vessels entering the Gulf, driving costs higher and dissuading shipping lines from attempting transit.
The effective paralysis of Hormuz, even without a formal, legally binding blockade, has significant consequences for the global energy supply chain.
Energy Markets Under Stress: Oil, LNG, and Shipping Costs
Oil Prices and Supply Risk
Brent crude has surged by double-digit percentages, and analysts warn oil could exceed $100 per barrel if flows through Hormuz are not quickly restored, reminding of price shocks seen during Russia’s 2022 invasion of Ukraine. Disruptions across logistics networks have led to higher gasoline and diesel costs in many countries.
Shipping and LNG Costs Spike
LNG shipping costs have also risen sharply, while some LNG production halts — such as pauses by major suppliers like Qatar in response to nearby attacks — compound shortages and price pressure.
Iran’s Strategy: Time, Internal Transition, and International Pressure
Iran’s leadership, including its transitional moment with a new Supreme Leader, appears to be pursuing a dual strategy:
- Buying time by leveraging symbolism and symbolic military actions to pressure domestic public opinion and rally regional resentment toward U.S. actions.
- Manifesting its influence over global energy markets by threatening to curtail or weaponize Hormuz traffic to force shifts in U.S. and allied strategic calculations.
By threatening the strait’s closure, Iran not only drives up costs for its neighbors’ oil exports but also attempts to create dissent among Western publics frustrated by rising fuel prices and economic fallout. These tactics, weaponizing energy dependence, impose pressure on U.S. allies in Europe and Asia to reconsider their support for aggressive military measures against Tehran.
Global Power Dynamics: China, Russia, Europe
China
China, heavily dependent on Gulf energy imports, has condemned the U.S.–Israel strikes and urged a ceasefire, even as it navigates internal and diplomatic pressures: Beijing imports a large share of its oil from the Middle East, much of it passing through Hormuz. While publicly backing diplomacy, China’s strategic calculus includes maintaining influence with Iran and diversifying energy sources.
Russia
Russia has condemned the U.S.–Israeli campaign and framed the strikes as a violation of international law, reinforcing its own alliance with Tehran. This crisis also distracts Western strategic bandwidth and resources, potentially affecting weapons production and supply to Ukraine, which had been relying on U.S. and allied munitions. Some defense analysts warn that the American focus on Iran could slow or complicate deliveries to the Ukrainian front in the near term.
Europe
The economic impact of Middle East instability is palpable, though EU policymakers initially say there’s no immediate oil security crisis thanks to diverse supply routes and reserves. Still, energy prices and inflation forecasts are rising, and uncertainty may constrain monetary policy flexibility. France has announced an increase in its nuclear deterrence and greater European defence coordination, reflecting concerns about strategic instability emanating from the Middle East. The conflict has prompted discussions about energy independence, strategic reserves, and defense cooperation across the EU, including contingencies for maritime and airspace disruptions.
In the Eastern Mediterranean, nations like Cyprus are grappling with heightened tensions as security threats extend beyond the Gulf, triggering concerns over civilian safety, flight disruptions, and migration flows.
What Comes Next
The situation remains dynamic and precarious:
- Maritime traffic may remain depressed until credible security guarantees, or alternative routes and insurance frameworks, are established.
- Energy markets could stay volatile, with prices sensitive to even minor developments at Hormuz.
- U.S., European, and Gulf states will need to balance military objectives with diplomatic and economic stability efforts, while countries such as China and Russia may use the moment to rebalance strategic partnerships.