Strait of Hormuz disruption: Experts warn of looming global energy shock; how hoarding might become a new normal

The disruption of flows through the Strait of Hormuz is emerging as a defining risk for the global economy, with analysts warning that the impact could stretch far beyond energy markets into food, manufacturing and inflation, leading to an energy shock.

The narrow waterway, a critical artery for global trade, typically carries a significant share of the world’s essential commodities, including crude oil, liquefied natural gas, fertilisers, helium and sulphur. With shipments effectively halted amid the ongoing conflict, supply chains are beginning to strain.

The immediate effect is already visible. Storage facilities have filled up behind the Strait, forcing several oil and gas production sites to shut down operations. Restarting such infrastructure is neither quick nor simple, often taking weeks or months, compounding supply shortages.

The situation has escalated further after attacks on key energy assets. Israeli strikes hit Iran’s South Pars gas field, the world’s largest, while Iran retaliated with strikes on Qatar’s Ras Laffan liquefied natural gas facility, removing an estimated 3.5 per cent of global LNG output for the next three to five years, as per a report by The New Statesman.

Asia is most exposed as energy flows tighten

The disruption is hitting Asian economies the hardest. In 2024, more than 84% of crude oil and condensate and 83% of LNG passing through the Strait of Hormuz were destined for Asia, including China, India, Japan and South Korea, according to Reuters.

That exposure is now testing the region’s resilience.

“Oil stockpiles are quite patchy. There isn’t necessarily a consistent pattern that explains why,” says Robin Mills, CEO of Dubai-based consultancy Qamar Energy and author of “The Myth of the Oil Crisis”.

Countries vary sharply in their ability to absorb shocks. China holds the largest buffer, with emergency reserves estimated at 900 million to 1.3 billion barrels, enough for up to 120 days. In contrast, India’s reserves cover only about 20 to 25 days of imports, while Australia has around 30 days’ worth.

Gas reserves are even more limited. Japan, for instance, holds inventories equivalent to just three weeks of consumption, highlighting the vulnerability of supply chains dependent on uninterrupted flows.

Prices rise, shortages risk spreading

Energy prices have already surged, with Brent crude crossing $110 per barrel. But the bigger risk lies in physical shortages.

The shutdown of production facilities has reduced the availability of key inputs, including fertilisers and industrial gases. These are essential to sectors ranging from agriculture to semiconductor manufacturing, amplifying the economic impact.

Higher input costs are also feeding into broader inflation. Large corporations, with pricing power, are expected to pass these costs on to consumers, potentially triggering another wave of price increases across sectors.

At the same time, shortages could create temporary monopolies in supply chains, limiting consumer choice and pushing prices even higher.

Global economy faces wider fallout

The crisis is reviving concerns of a broader economic shock, reminiscent of disruptions seen during the Covid-19 pandemic and the Ukraine war, The New Statesman reported.

The International Energy Agency has already authorised the release of 400 million barrels from strategic reserves to stabilise markets. But the scale of disruption raises questions about how long such measures can offset supply losses.

Beyond energy, the risk extends to food production, as fertiliser supply tightens during key planting seasons. For import-dependent economies, particularly in parts of Asia, the consequences could go beyond price spikes to actual shortages.

(With inputs from Reuters)