The Strait of Hormuz Crisis
- WULR Team
- 6 days ago
- 4 min read
An analysis of the Strait of Hormuz crisis and its profound challenge to the stability of our interconnected world.
Published July 12th, 2026
Written by Tristan Carrington
The Conflict That Triggered the Crisis
Since the closure of the Strait of Hormuz, the narrow waterway between Iran and Oman, on February 28, 2026, the global economy has been grappling with a shortage of oil and liquified natural gas that supplies nearly one-fifth of the world. Iran’s blockade—in response to the U.S. and Israel’s Operation Epic Fury in which they killed Iran's former Ayatollah, Ali Khamenei—has left many countries in limited supply of oil, causing disruptions in supply chains and geopolitical alliances worldwide. By March 2, according to the South China Morning Post, Iran's Revolutionary Guard Corps confirmed the closure of the Strait, warning that any vessel entering the Strait that was an allied member to either the US or Israel would be targeted, yet the distinction has done little to resume normal traffic for the waterway.
Oil Markets in Freefall
When comparing the current oil supply disruption to earlier conflicts that resulted in major oil supply disruptions, The Federal Reserve Bank of Dallas found that the current disruption affects up to 20% of the market compared to 6% in previous events. They modeled a complete cessation of oil exports from the Gulf—even if shipping resumes after the 3rd quarter in 2026, crude oil prices could continue to rise until hitting $132 a barrel, up from an average 60 ~$60 in late 2025/early 2026. Additionally, US gasoline prices have soared to an average of $4 per gallon despite the U.S. being a major domestic oil producer, yet we aren’t being hit the hardest.
The World Feels the Pressure
CNBC reports that Asia bears the largest burden from the closure of the Strait of Hormuz. The region depends heavily on Gulf oil and liquified natural gas, with Japan and South Korea sourcing ~70% of their crude oil from the Middle East, specifically through the Strait of Hormuz. South Asia faces even harsher conditions, with 99% of Pakistan’s, 72% of Bangladesh’s, and 53% of India’s LNG coming from Qatar and the UAE. Compounded with an already limited storage and procurement dilemma, as well as the majority of crude oil imports coming from the Middle East, a sustained blockade would significantly hinder their access to oil. As an ally of Iran, China has sourced a total of 4-5 million barrels of crude oil per day since 2020, about equivalent to the total of the U.S., Europe, South Korea, and Japan combined. China, while materially exposed, has roughly 7.6 million tons of LNG inventory that will provide cover as the war continues.
Though much of the Gulf itself produces oil, geography has determined whether or not they can continue to export. Despite Iran’s control over the Strait, Oman, Saudi Arabia, and the UAE have bypassed the closure via pipelines and ports, The Straits Times says. Iraq, Kuwait, and Qatar are among the countries with stalled oil exports due to a lack of access to international markets.
The U.S. Response
CNN reported that four sources inside the Pentagon attested to a contingency plan that the Defense Intelligence Agency had circulated in response to the possibility that Iran keeps the passage closed for up to six months. Although the plan is not being heavily considered, according to Pentagon spokesperson Sean Parnell, it is contingent on the success of the U.S. and Israel in degrading Iran’s military capabilities and subsequently the reopening of the Strait. Throughout the war, Trump has threatened Iran with overwhelming military action that he described in an Easter Truth Social post as “Hell.” Trump has claimed to be unaffected by the closure, saying that the US has won the war, but the continued threats and closure of the Strait of Hormuz seem to suggest otherwise.
A World Connected
At its most fundamental level, the closure of the Strait of Hormuz reveals just how deeply interconnected the world truly is. A 21-mile-wide channel of water between Iran and Oman has determined for the past month whether people’s businesses can open, if people can drive, whether machines can run, or if people can heat their homes. No country has remained insulated from the consequences of closing the Strait.
The post-Cold War assumption that the liberal economic order would produce global economic stability is effectively debased by the closure. Policymakers have operated for decades that trade ties would limit conflict, that having economies so intertwined would make it not only financially irresponsible to wage the mutual risk of war, but also financially impossible. The Hormuz crisis challenges this long-held perspective. Iran, in facing certain destruction, chose to weaponize the global economy, sacrificing their own economic capabilities to gain leverage in war. The very thing that economists and policymakers believed would limit conflict became an instrument of conflict.
In the context of international relations, alliances are shifting in real time. China relies heavily on the strait for its energy imports, yet finds itself at an economic disadvantage to an Iran that it cannot condemn without undermining an important ally. The U.S. now has to navigate reassuring an increasingly antagonized NATO, EU, Japan, and several other allies to maintain diplomatic ties in the midst of the economic crisis they caused. Trump must do this while also downplaying an economic crisis that has raised the cost of living for Americans everywhere in the U.S. Al Jazeera reports that the U.K., meanwhile, has stepped into a role where it must find a way to convene with 40 nations in an attempt to rationalize and cement a diplomatic path forward with a U.S. that seems to reject diplomacy every chance it gets.
Most significantly, perhaps, is the realization that geography still matters in a globalized world. Perhaps it isn’t the best decision to place the livelihood of a large majority of your country’s energy imports on a single checkpoint. Globalized supply chains still rely on transport by ships, through supply routes, stabilized by diplomatic relations. Whoever holds leverage in these domains can shape the global path forward. The Strait of Hormuz crisis has shown the world that it cannot afford to be complacent in its interdependence again.
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