BlockBeats report, March 3: Amid escalating conflicts within Iran and retaliatory actions across the Middle East, the Strait of Hormuz has once again become a focal point for the global economy. Analysts warn that even partial or temporary disruptions to oil supplies could significantly impact the global economy; if the strait remains closed for an extended period, the global economy may face a "certain recession."
Bob McNally, founder of Rapidan Energy Group and former energy advisor to the Bush administration, said: "A prolonged closure of the Strait of Hormuz would push the global economy into a definite recession."
According to the U.S. Energy Information Administration, approximately 20% of global liquefied natural gas (LNG) trade and about 38% of global crude oil supplies pass through this strait in 2024. Saudi Arabia alone transported an average of 5.5 million barrels of crude oil per day through this route in 2024. Although alternative pipelines across the Arabian Peninsula exist, their limited capacity cannot compensate for a complete closure of the strait.
Even before Iran actually blocked the strait, market expectations were disrupted. Media reports stated that Iran’s military warned the area was “unsafe,” causing vessel traffic through the strait to drop by approximately 70% compared to the previous day.
Research institutions estimate that if the strait closure lasts more than a year, approximately 15% of global LNG supply will disappear, with Europe, India, and Japan facing the most severe import disruptions. Analysts believe that if attacks on or restrictions to Gulf energy infrastructure persist longer, oil prices could rise above $100 per barrel. Some institutions assess the probability of oil prices reaching $120 per barrel at around 20%.
However, the analysis also notes that Iran faces practical constraints in enforcing a long-term blockade, including the U.S. military presence in the region and the potential diplomatic consequences of cutting off energy supplies. Historically, Iran has repeatedly threatened to close the strait but has never actually done so.
Energy consultancy Wood Mackenzie notes that while the oil crises of the 1970s triggered a global recession, the global economy is now significantly less dependent on oil. To replicate the scale of that shock, oil prices would need to rise to around $200 per barrel. The firm believes that if ongoing conflicts continue to drive up oil and gas prices and strain vulnerable economies, severe volatility in global financial markets could compel affected nations to seek de-escalation.