From Chokepoint to Crisis: The Strait of Hormuz and Global Oil Markets

Source: Brookings Institution — Part of "Blowback: How the Iran War May Change the World" series
Published: June 8, 2026 (approximately 2 weeks ago as of June 22, 2026)
Author: Brookings Institution
URL: https://www.brookings.edu/articles/from-chokepoint-to-crisis-the-strait-of-hormuz-and-global-oil-markets/

Summary

The Strait of Hormuz has long been understood as the world's most important energy shipping chokepoint. Following the US and Israel attacking Iran on February 28, 2026, Iran retaliated by using drones, ballistic missiles, and small attack boats to threaten and attack vessels transiting the strait. Insurance became unavailable or prohibitively expensive, and seafarers unwilling to make the journey — meaning the strait is effectively closed.

Iran continued its own crude oil exports of about 2 mbd until the US began its blockade on April 13, 2026. Today, ship traffic is at a near-standstill except for vessels that have paid a "toll" to the IRGC for safe passage.

Key Facts

Pre-War Baseline

  • ~20% of global oil supply flowed through strait prior to the war (~15 mbd crude + 5 mbd refined products)
  • 80% of exports from Gulf shipped to Asia

Pipeline Bypasses

  • Saudi East-West pipeline to Yanbu (Red Sea): now running at full capacity, delivering 7 mbd
  • UAE Habshan-Fujairah pipeline to Gulf of Oman: fully utilized, delivering 1.8 mbd
  • Even with these workarounds, IEA estimates affected countries' oil output is down more than 14 mbd

US Blockade (April 13 Onward)

  • Iran kept exporting ~2 mbd until US blockade started April 13, 2026
  • US blockade ended Iranian export revenue stream
  • After US blockade, Iran attempted tiered charge system for passage preference

Insurance Crisis

  • Insurance unavailable or prohibitively expensive for vessels transiting the strait
  • This alone effectively closed the strait even before physical attacks

IRGC Toll System

  • Iran implementing tiered system of charges to pass the strait
  • Preference given to ships from states friendly with Tehran
  • Ships encouraged to follow route in Iranian territorial waters (mined shipping lanes in middle of strait)

IEA Reserve Release

  • Largest release of oil reserves in history: coordinated sale of 400 million barrels
  • Adds roughly 2.5–3 mbd to market
  • IEA Executive Director Fatih Birol: release could be spent by July or August

US Exposure

  • US is world's largest oil producer and a net oil exporter (including refined products)
  • Still exposed to same price shocks as rest of world because oil is globally traded and fungible
  • As of June 1: average gasoline $4.31/gallon, diesel $5.35/gallon
  • Prices down slightly from mid-May highs (when gasoline was ~$1.50 above pre-war, diesel ~$2.00 above)

Market Normalization Timeline

  • Even if strait reopens soon, oil market will take months to normalize
  • Damaged infrastructure needs repair
  • Stopped production needs restart
  • Vessels need to travel to areas of demand

Long-Term Investment Impact

  • Oil companies profiting from higher prices today
  • War has created much more uncertain market environment for future investment
  • Pre-war: oil glut → Post-war: supply shock
  • US oil producers slow to increase production so far

Policy Observations

  • No short-term policy solutions besides ending the war
  • Long-term protection: continuing to electrify vehicle fleet and increasing vehicle efficiency standards
  • Reestablishing freedom of navigation would require control of Iranian territory from which missiles/drones could be launched — not just a naval issue

Sources

  • IEA Oil Market Report (May 2026)
  • ICIS (April 13, 2026) — Saudi East-West pipeline
  • Reuters — various
  • New York Times (June 2, 2026)
  • Crisis Group — visual explainer on Hormuz mining