Oil, gas prices spike as Iran war thrusts Strait of Hormuz into crisis
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Illustration: Annelise Capossela/Axios
The Iran war has cast a sharp spotlight on the global economy's reliance on the Strait of Hormuz.
Why it matters: The strait is a chokepoint for critical global commodities — and prices for oil, gas, plastics and fertilizers are already surging on fears of war-related disruptions.
The big picture: American consumers and businesses are already experiencing the effects, with average gasoline prices up 17% since the war began, according to the Oil Price Information Service.
- "If the strait remains closed next week, we're looking at diesel prices between $4.50 and $5 and we're looking at gasoline probably at $4 in a lot of places," Gulf Oil analyst Tom Kloza told Axios Friday.
Threat level: About 20% of global oil supplies travel through the Strait of Hormuz on a regular basis, according to Tortoise Capital senior portfolio manager Rob Thummel.
- "A closure would likely create short-term panic across global oil markets as traders and refiners scramble to understand how global supply will be delivered," Thummel said in an email.
- While oil is stockpiled around the world, those inventories cover only a few months of demand — leaving only so much cushion if a major supply route is disrupted, he noted.
Meanwhile, about 84% of the Middle East's polyethylene — a common plastic used in packaging, bottles and pipes — goes through the strait, according to trade publication Hydrocarbon Engineering.
- And a sizable share of the world's urea and other nitrogen- and phosphate-based fertilizers moves through it, including supplies from Gulf producers such as Qatar and Saudi Arabia.
The effects would be felt especially acutely in global shipping costs and on jet fuel and European utilities, which rely on liquefied natural gas flowing through the strait.
- "Supplies are typically headed to businesses and regions which have little other resource access," Rob Haworth, senior investment strategy director at U.S. Bank Asset Management, said in an email.
- Transportation and chemicals sectors are the most directly impacted by supply shortages, he said.
- And Kloza said the market won't take much solace in the Trump administration's pledge to help escort ships through the strait, especially given the sheer volume of energy that travels through the region: "I don't think there's a quick fix," he said.
State of play: The price of West Texas Intermediate oil — the American benchmark crude — has soared 40% over the last week, to above $100 per barrel Monday.
- WTI is now at its highest level since the summer of 2022. "With no immediate signs of resolution," it is adding to inflation pressures that could weigh on consumer spending, according to Angelo Kourkafas, senior global strategist for investment strategy at Edward Jones.
Yes, but: "Even so, history shows that geopolitical shocks typically have short‑lived market effects," Kourkafas said.
- "Oil prices often rise in anticipation of major events and peak shortly afterward. For instance, WTI peaked just 10 days after the Israel–Iran conflict in the summer of 2025 and roughly three months after Russia's invasion of Ukraine."
The bottom line: Nerves are fraying.
