Oil Prices Expected to Remain Elevated as Strait of Hormuz Shipping Comes to a Near-Standstill Following U.S.-Israel Strikes on Iran

Reuters reports that oil prices are expected to stay at elevated levels in the coming days, as global energy markets focus on whether commercial tanker flows through the Strait of Hormuz can be restored following the outbreak of military conflict between the United States, Israel and Iran. The disruption has triggered the most significant shock to global oil shipping in years, with analysts, governments and industry participants watching developments closely.

Brent crude prices jumped approximately 10% to around $80 a barrel in over-the-counter trading, oil traders told Reuters, after the global benchmark had already been rising in the days leading up to the first airstrikes, closing at a seven-month high of $73 a barrel on Friday.

Analysts have warned the pressure on prices is unlikely to ease quickly. Ali Vaez, director of the Iran project at the International Crisis Group, said that closure of the Strait of Hormuz would disrupt roughly a fifth of globally traded oil overnight, and that prices would not merely spike but gap upward on fear alone, with the shock reverberating far beyond energy markets, tightening financial conditions, fuelling inflation and pushing fragile economies toward recession within weeks.

Tanker Traffic and Shipping Suspensions

Several of the world's largest oil companies and trading houses have suspended crude and fuel shipments through the Strait of Hormuz, as U.S. and Israeli strikes on Iran — and Tehran's retaliation — have unsettled global energy markets. Reuters, citing four trading sources, reported that several firms paused voyages amid concerns over the safety of the narrow waterway. "Our ships will stay put for several days," a senior executive at a major trading desk told Reuters.

Intelligence service provider Skytek identified over 100 container ships, 450 oil and gas tankers and 200 bulk carriers currently inside the Strait of Hormuz region. Kpler data showed that four very large crude carriers — the Orbiter, Universal Victor, Mitake and Trikwong Venture — diverted the area, collectively representing approximately 8 million barrels of crude scheduled to be loaded between 3 and 7 March.

Ship tracking platform MarineTraffic recorded a 70% drop in vessel traffic through the Strait late on Saturday evening, according to Dimitris Ampatzidis, a senior risk and compliance analyst at Kpler, MarineTraffic's parent company.

German container shipping group Hapag-Lloyd said it was suspending all vessel transit through the Strait until further notice, and French shipping group CMA CGM instructed its vessels inside or heading for the Gulf to proceed to shelter. Fourteen LNG tankers showed signs of slowing, turning around or stopping in or around the Strait, according to Kpler consultant Laura Page, who noted the number was likely to rise, posing risks to Qatari LNG exports.

Among specific vessels, the Eagle Veracruz, carrying two million barrels of Iraqi crude bound for China, halted at the western approach to the strait, joined by the Front Beauly carrying a similar volume of Saudi crude. The supertanker Mitake, en route to Ras Tanura in Saudi Arabia, also reduced speed east of Oman.

Iran's Position and IRGC Activity

An official from the EU naval mission Aspides told Reuters that vessels crossing the strait had received VHF transmissions from Iran's Islamic Revolutionary Guard Corps stating that no ship is allowed to pass the Strait of Hormuz, though Iran had not formally closed the waterway.

Three ships were attacked near the mouth of the Persian Gulf, with Iran stating it did not intend to shut the waterway, just a day after ships in the area heard radio broadcasts stating that transit through Hormuz was banned. The British Royal Navy described Iran's orders as not legally binding and advised commercial vessels to transit with caution.

The United States established a maritime warning zone in the Persian Gulf, Gulf of Oman, North Arabian Sea and the Strait of Hormuz, with BIMCO's chief safety and security officer Jakob Larsen noting that the zone was intended to signal that dangerous military operations were taking place and that the U.S. Navy could not guarantee the safety of neutral or merchant shipping.

Scale of the Chokepoint

The Strait of Hormuz handles approximately 30% of the world's seaborne crude oil, as well as nearly 20% of global jet fuel and about 16% of gasoline and naphtha flows. According to the U.S. Energy Information Administration, roughly 20 million barrels of oil per day transited the strait in 2024, representing approximately $500 billion in annual global energy trade. In the same year, about a fifth of global LNG shipments moved through the corridor, with Qatar accounting for the vast majority of those volumes.

The EIA estimated that 84% of crude oil and condensate shipments transiting the strait in 2024 were destined for Asian markets, with a similar pattern for LNG, where 83% of volumes were headed for Asian destinations.

Kpler analyst Ampatzidis noted that Saudi Arabia, Iraq, the UAE and Qatar are among the most exposed producers, as the majority of their seaborne crude and LNG exports pass through Hormuz.

For China, the world's largest crude importer, any sustained disruption in the Strait of Hormuz would test its energy security. China purchases more than 80% of Iran's exported oil, according to Kpler data, with Chinese independent refiners — primarily clustered in Shandong province and known as "teapot" refineries — serving as the primary buyers of Iranian crude. These refiners account for roughly a quarter of China's refining capacity and operate on narrow margins.

Freight Rates and Alternative Arrangements

Saudi Arabia's national shipping company Bahri provisionally hired at least five supertankers as freight rates approached $200,000 per day, the highest since 2020, signalling rising Saudi crude exports to Asia amid the disruption.

Xeneta's chief shipping analyst Peter Sand warned that the military operation would further weaponise trade, adding that plans for a phased return of container shipping to the Red Sea in 2026 would be shelved until the security situation became clearer.

Hamad Hussain, a climate and commodities economist at Capital Economics, said a sustained rise in oil prices would add upward pressure on inflation globally, driving up fuel and factory costs. Analysts at Wood Mackenzie have indicated that if tanker flows are not quickly restored, prices could cross $100 per barrel — a threshold that would amplify inflationary pressures across major importing economies.