How Iran's Strait of Hormuz shutdown could hit the global economy
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A map shows the Strait of Hormuz on a laptop computer screen in this photo illustration taken in Athens, Greece, on March 1, 2026. Photo by Nikolas Kokovlis/NurPhoto via Getty Images
The U.S. and Israel's war with Iran is likely to impact people around the world as tensions escalate around the Strait of Hormuz, a waterway on Iran's southern coast, where traffic has ground to a halt.
Why it matters: Trade disruptions along this key waterway on Iran's southern coast that handles 25% of the world's maritime oil trade and 20% of liquefied natural gas shipments will likely produce a domino effect across the global economy.
- About 33% of the world's fertilizers, including sulfur and ammonia, travel through the strait, according to the trade analysis firm Kpler.
• It's a key route for alumimum and sugar as well. - Blocked access to the strait will likely impact the price of some products, including clothing, cookware, medical equipment, and more.
State of play: The strait is "closed" and any vessel attempting to pass through the waterway would be set "ablaze," an Iran Revolutionary Guard Corp (IRGC) commander said Monday.
Driving the news: President Trump said on Truth Social on Tuesday that the U.S. will "immediately" offer "political risk insurance and guarantees" for energy tankers and other ships in the Gulf region, and that the Navy would escort tankers through the Strait of Hormuz if needed.
- The U.S. has been striking Iranian warships in order to reduce Iran's stronghold over the strait.
What they're saying: "The scale of what is at stake cannot be overstated," Hakan Kaya, senior portfolio manager at investment management firm Neuberger Berman, said in a blog post this week.
- Oil companies can likely absorb a one- to two-week slowdown, he said.
- "A full or near-full closure lasting a month or more would require demand destruction at levels that could push crude well into triple digits and European natural gas prices toward or above the crisis levels seen in 2022," Kaya added.
Here's what to know:
Gas prices
Threat level: With access to oil restricted, oil prices and gasoline prices have spiked.
- Tom Kloza, an oil analyst working for Gulf Oil, told Axios that he expects the national average gas price to reach a high of $3.25 to $3.50 a gallon in the coming weeks.
- Prices won't just sting at the gas pump — the cost of jet fuel is spiking as well, which likely means travel will get more expensive.
Yes, but: The U.S. is the world's largest oil producer and far less dependent on the fuel now than it was in 1979, when a crisis in Iran caused widespread disruption in the United States.
Impact on farmers
Between the lines: The hit to the world's fertilizer supply will likely hurt U.S. farmers.
- QatarLNG, a subsidiary of Qatar Energy, a state-run oil and gas company, said on Tuesday that it would cease production of many products following drone strikes on some of its facilities.
Zoom in: Veronica Nigh, a senior economist at the Fertilizer Institute, a U.S.-based industry advocacy organization, told Wired that in the U.S. most fertilizer demand goes to large row crops like corn, soy, wheat, and cotton.
- For fertilizers, Nigh said almost 30% of ammonia's global production is "either involved or at risk in this conflict" and it's 50% for urea.
- Farmers of those crops will likely experience increased prices for necessary fertilizers if the war keeps going, Nigh said.
- Saudi Arabia, for instance, supplies about 40% of all U.S. phosphate imports, which are used to make any fertilizers, according to Nigh.
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