The effective closure of the Strait of Hormuz has produced the largest energy supply shock in modern history, "Hvylya" reports, citing a detailed analysis by The Economist. Iranian strikes have stranded about 15% of global oil output on the far side of the strait - roughly double the disruption the world suffered during the 1970s oil crises.
The blow extends well beyond crude. About a fifth of global liquefied natural gas shipments have also been halted, and the shock is rippling into fertilizer, sulphur, and even helium - a gas critical for semiconductor manufacturing. The IMF has urged governments to prepare for the "unthinkable."
On March 11, the International Energy Agency announced the release of up to 400 million barrels from emergency reserves, but the measure is a temporary fix subject to logistical bottlenecks. Prices actually rose after the announcement. Crude oil stood about $25 a barrel above pre-war levels as of mid-March, having eased slightly after Donald Trump claimed on March 9 that his "little excursion" in Iran was already "very complete, pretty much."
Yet the apparent calm in prices is deceptive. Nobody knows what price level would be needed to permanently reduce global oil consumption by 15%. Some analysts project crude could hit $150 or even $200 a barrel if the strait remains closed through the end of March. That scenario would push the global economy into recession while driving inflation sharply higher - a textbook repeat of 1970s stagflation.
The energy intensity of the world economy has fallen by roughly half since the 1970s, but The Economist notes that the sheer scale of the current disruption offsets that progress entirely. The old assumption that a big enough shock in the Gulf could no longer trigger a profound global crisis has been proven wrong. Every day that passes without the strait reopening makes the market's balancing act harder - and the ultimate price adjustment steeper.
Also read: Ferguson Starts Counting Tankers - and Explains Why the Next Five Days Decide Everything.