Strait of Hormuz blockade reshapes global energy flows as buffers dwindle

Iran's control of the Strait of Hormuz since late February has blocked a waterway that normally carries one-fifth of the world's oil and gas, forcing a fundamental reshaping of global energy trade routes.

"The buffers that have kept markets stable — strategic reserves, alternative pipelines, and lower Chinese demand — are running thin," said Fatih Birol, executive director of the International Energy Agency. "We should be worried if the situation does not improve in the next few weeks."

Brent crude surged to nearly $126 a barrel in late April before easing after a coordinated IEA release of as much as 400 million barrels knocked about $20 off prices. US gasoline averaged $3.94 a gallon Thursday, up from $2.98 on Feb. 26, according to AAA data. Just 13 vessels transited the strait on Wednesday, compared with 138 a day before the conflict, according to Kpler.

The disruption has hit Asia hardest — the region sourced 80% to 90% of its energy imports through the strait — with developing economies including Pakistan, Bangladesh and India bearing the brunt. The IEA's 400-million-barrel release, while the largest in history, consumed only 20% of member countries' strategic stocks, Birol said, warning that the remaining 80% offers limited insulation if the blockade persists.

Alternative Routes Face Their Own Risks

Saudi Arabia has rerouted some crude volumes through a pipeline to the Red Sea, boosting exports via the Bab el-Mandeb Strait. Crude and condensate transiting that waterway rose to 5.4 million barrels a day in the first quarter of 2026, up from 3.7 million in the same period a year earlier, according to the US Energy Information Administration. Liquefied natural gas flows through the passage resumed at 2.9 billion cubic feet a day after halting entirely in mid-2025.

But the Bab el-Mandeb carries its own threat. Iran's Islamic Revolutionary Guard Corps has warned it could target "all other export corridors that benefit the US and its allies," and Houthi officials in Yemen have threatened to close both straits in an operational alliance. During the Houthi campaign against Red Sea shipping in 2023 and 2024, transit through the Bab el-Mandeb fell by more than half and shipping costs soared.

Strategic Stocks Are Not Infinite

China entered the conflict with more than 1 billion barrels of crude in storage, and its shift toward electric vehicles and public transport has curbed demand growth. US production has risen by 1 million to 2 million barrels a day. Neither buffer is sustainable. "The US increased 1 million, 2 million but it cannot increase 10 million," Birol said.

The IEA's coordinated release in March signaled that member countries could tap reserves again if conditions worsen. "Even though it was huge, it was only 20% of the stocks we have," Birol said. "Eighty percent is still in the pocket."

The longer the strait remains blocked, the more the world's emergency cushion erodes — and the fewer tools remain to absorb the next shock. President Trump's suggestion last week that the US could control the strait and collect tolls, which he quickly walked back, did little to reassure markets already pricing in a prolonged disruption.

This article is for informational purposes only and does not constitute investment advice.