Strait of Hormuz Crisis: Global Supply Chain Disruption and Energy Market Impact

Status: RESTRICTED

Shipping Assessment: Commercial traffic through the Strait of Hormuz has declined by 95 percent since late February 2026 . While the United States Navy and Iranian forces maintain a dual blockade posture, Iran has permitted selective transit for Chinese-affiliated vessels and specific cargoes bound for Iraq and Pakistan under bilateral agreements . The American P&I Club assesses that crew fear and safety risks, rather than pure financial barriers, are the primary factors halting broader commercial navigation .

Naval Activity: United States and Iranian naval forces remain in a high-alert standoff following the breakdown of recent ceasefire negotiations in Geneva . The United States Navy continues operations to counter Iranian mine-laying and vessel seizures, while Iran maintains the capability to target commercial shipping with drones and anti-ship missiles . Approximately 20,000 mariners and 2,000 ships remain stranded or delayed in the broader Persian Gulf region .

Insurance Premiums: Additional War Risk Premiums have eased slightly to 1 percent of Hull and Machinery value, down from a peak of 2.5 percent in March 2026, but remain eight times higher than the pre-war baseline of 0.1 percent . In extreme cases, stranded tankers previously paid up to 10 percent in premiums . Emergency logistics surcharges of $2,000 per twenty-foot equivalent unit are being applied to rerouted cargo .

Price Movement: Brent crude spot prices averaged $117 per barrel in April 2026, peaking at $138 per barrel, before stabilizing near the $105 to $115 range in mid-May 2026 . The aviation sector faces severe cost pressures, with jet fuel prices surging 120 percent to over $1,500 per tonne due to a shortage of Middle Eastern refined product exports .

Opec Response: OPEC April 2026 production fell by 830,000 barrels per day to 20.04 million barrels per day, a 35-year low, driven by the inability of Gulf members to export through Hormuz . In response, OPEC approved a third consecutive output hike . The United Arab Emirates officially left OPEC on May 1, 2026, to independently manage its production and leverage its bypass pipelines .

Supply Disruption Assessment: The crisis has removed an estimated 11 million barrels per day of net oil supply from the global market after emergency offsets . This represents the largest supply shock since the 1970s energy crisis . Approximately 110 billion cubic meters of annual liquefied natural gas trade and 30 percent of globally traded fertilizer inputs are currently trapped or severely delayed .

Btc Pipeline: The Baku-Tbilisi-Ceyhan pipeline is operating at elevated capacity as European buyers seek alternatives to Gulf crude . The infrastructure remains physically secure, though regional operators are maintaining heightened vigilance due to the broader geopolitical volatility. Freight volumes along this Middle Corridor route are projected to triple to 11 million tonnes by 2030 .

Other Pipelines: The Southern Gas Corridor, including the Trans-Anatolian Natural Gas Pipeline, is running at full capacity, serving as the sole major overland route delivering non-Russian, non-Gulf gas to Europe . Saudi Arabia's East-West Petroline and the United Arab Emirates' Abu Dhabi Crude Oil Pipeline are operating at maximum throughput to bypass the Strait of Hormuz, though they can only offset a fraction of the disrupted maritime volume .

Pakistan: Pakistan is facing a severe energy crisis, as it relies on the Gulf for 90 percent of its petroleum imports . The government has instituted a four-day work week and early commercial closures to conserve fuel . To secure critical supplies, Islamabad negotiated a bilateral agreement with Tehran, ensuring the safe transit of two Qatari liquefied natural gas tankers through the Strait of Hormuz .

Azerbaijan: Azerbaijan has emerged as a critical strategic beneficiary of the Hormuz closure. SOCAR Trading reports that the country is maximizing exports to Europe to fill the 13 to 15 million barrel per day global shortfall . The Middle Corridor transit route through Azerbaijan is projected to see freight volumes triple to 11 million tonnes by 2030 as logistics providers abandon maritime chokepoints .

Georgia: Georgia's role as a vital transit hub has amplified significantly. With the Southern Gas Corridor operating at maximum capacity, Georgian pipeline infrastructure is essential for delivering Azerbaijani gas to Turkey and the European Union . This overland route insulates regional partners from the Persian Gulf supply shock and elevates Georgia's strategic importance to Western energy security .

• Immediately audit supply chains for exposure to Middle Eastern refined products, particularly jet fuel and diesel, and secure forward contracts from Atlantic Basin or Asian suppliers.
• Reroute critical European-bound freight through the Middle Corridor via Kazakhstan, Azerbaijan, and Georgia to bypass both the Red Sea and Persian Gulf maritime risks.
• Factor a sustained 1 percent Additional War Risk Premium into all financial models for vessels operating in the broader Gulf of Oman and Arabian Sea.
• Prepare for force majeure declarations from regional liquefied natural gas suppliers; secure alternative natural gas volumes from North American or West African terminals.

• Expansion of Saudi and UAE Bypass Pipelines:
• Prolonged Aviation Fuel Shortages in Europe and Asia:
• Bilateral Transit Deals Undermining Sanctions:

This assessment synthesizes reporting from Reuters, Dawn, IRNA, RIA Novosti, shipping monitors, and 40+ and additional sources across multiple languages. Items are verified through cross-referencing across language boundaries.