The Strait of Hormuz, a critical chokepoint for 20% of global crude oil and natural gas, has been effectively closed due to the Iran war.
This unprecedented "insurance-driven shutdown," triggered by cheap drone strikes rather than a naval blockade, has been deemed "about as wrong as things could go" for energy markets. Global crude oil prices have surged over 10% since the U.S. and Israel attacked Iran, with European and Asian natural gas prices rising even more sharply.
The closure, which typically sees 20 million barrels of oil per day, has forced major producers like Iraq to halt production due to lack of export routes. While some stockpiles and alternate routes exist, recent attacks on infrastructure in Saudi Arabia, Qatar, and UAE cast doubt on their viability.
Experts, including RBC Capital Markets' Helima Croft, are calling this the "biggest energy crisis since the oil embargo in the 1970s." The U.S. government has responded by offering naval escorts and political risk insurance through the DFC to mitigate the crisis.