Key Takeaways:
Saudi Aramco’s chief executive warned that the continued closure of the Strait of Hormuz could remove 100 million barrels of oil from the market each week, a supply shock that sent Brent crude futures surging over 4% to top $105 a barrel.
“The market has already lost about 1 billion barrels of oil supply during this crisis,” Saudi Aramco CEO Amin Nasser said on Monday, highlighting the severe impact of the 10-week conflict.
The warning triggered a sharp market reaction, with Brent crude for July delivery rising $4.04, or 3.99%, to $105.33 a barrel. West Texas Intermediate climbed $4.43, or 4.64%, to $99.85 per barrel. The rebound reverses last week’s 6% decline, which was driven by ultimately false hopes of a peace deal between the U.S. and Iran after President Trump rejected Tehran's response as "totally unacceptable."
The escalation underscores how dependent global energy security is on a handful of maritime chokepoints. With the Strait of Hormuz, which normally carries a fifth of the world’s oil, effectively closed, the market is grappling with the largest supply disruption on record. The shock has already forced refiners across Asia and Europe to cut runs by as much as 3.8 million barrels per day in April, according to analysis from J.P. Morgan.
While naval blockades dominate headlines, the crisis has exposed a more insidious threat to global oil flows: maritime insurance. War-risk premiums for ships transiting Hormuz have soared from a nominal 0.25% of a tanker's hull value to between 3% and 10%. For an average-sized tanker valued at $250 million, that translates to an increase from $625,000 to as much as $7.5 million per voyage, making transit commercially unviable.
"The Strait of Hormuz remains the key pressure point for global energy markets, and any threat to shipping flows can quickly raise freight costs, insurance costs, and fear of tighter available crude supply," said Naeem Aslam, CIO at Zaye Capital Markets.
This "financial blockade" is orchestrated not by navies, but by the Lloyd’s Market Association’s Joint War Committee (JWC), a panel of Western underwriters whose guidance is followed globally. The precedent set during the Ukraine war, where all Russian territorial waters were eventually listed as high-risk, suggests a similar fate could await China's major oil terminals in a conflict over Taiwan, effectively shutting them to commercial shipping regardless of the route taken.
The crisis throws China’s "Malacca dilemma"—its dependency on the Strait of Malacca for about 80% of its oil imports—into sharp relief. Beijing has long feared a hostile power could blockade the narrow sea-lane. Yet the Hormuz crisis demonstrates that China's energy supply can be held hostage not by warships, but by insurance underwriters in London.
Beijing's attempts to build workarounds, including overland pipelines and a state-backed insurance pool, are currently insufficient to counter the threat. The China P&I Club and a Hong Kong war-risk pool have a combined capacity that cannot even fully cover a single modern oil tanker. Its "shadow fleet" of tankers operating outside the mainstream insurance system remains vulnerable to sanctions targeting the inspectors, brokers, and banks that facilitate its operations.
Even with the Hormuz crisis contained, analysts expect a geopolitical risk premium to remain embedded in oil prices. Analysts at ANZ expect Brent crude to remain above $90 per barrel through 2026, with prices likely to stay in a range between $80 and $85 per barrel into 2027 as global inventories are gradually rebuilt.
This article is for informational purposes only and does not constitute investment advice.
