A month after the Strait of Hormuz was effectively closed to shipping traffic following the outbreak of war between the US and Israel and Iran, economists and energy experts are warning that the true economic pain has yet to be felt — and that the scale of disruption already exceeds anything seen during the oil shocks of the 1970s.
The narrow waterway, through which roughly a fifth of the world’s oil normally passes, has been shut to commercial vessels since the conflict began. Gulf states that depend on the route to export oil, gas and other goods have seen their shipments halted, though experts note that supplies which left the region before the closure are still arriving at refineries worldwide. That buffer, however, is running out.
Lars Jensen, who heads the consultancy Vespucci Maritime and previously held a senior position at Maersk, told the BBC’s Today programme that even if the strait were to reopen immediately, shortages would continue to worsen. “We will face massive energy costs, not just while this crisis goes on but also for six to 12 months after it’s over,” he said.
The raw numbers help explain the concern. Alicia Garcia Herrero, chief economist for Asia Pacific at Natixis CIB, pointed out that the oil shocks of the 1970s cut global supply by between five and seven per cent. The current disruption, she noted, affects around 20 per cent of the world’s supply — a figure she described as dwarfing what came before. She also warned the crisis extends beyond oil, encompassing gas supplies and other refined products, with the sharpest consequences likely to fall on import-dependent economies in Asia.
Fatih Birol, director of the International Energy Agency, has described the situation as “the greatest global energy security threat in history” — a claim that places the current crisis above both the 1970s price shocks and the surge in European gas prices that followed Russia’s invasion of Ukraine.
For historical context, the 1973 oil crisis was triggered when Arab producers imposed an embargo on nations, including the United States, that had backed Israel during the Yom Kippur War. Combined with coordinated production cuts, it caused oil prices to nearly quadruple within months, pushing both the US and UK into recessions that lasted until 1975. A second shock followed in 1979 with the Iranian Revolution.
Not all experts, however, believe a repeat of that era’s chaos is inevitable. Economist Dr Carol Nakhle, chief executive of Crystol Energy, argued that today’s oil market is considerably more resilient, noting it is more geographically diversified, less reliant on oil overall, and supported by emergency reserve mechanisms that did not exist fifty years ago. Dr Tiarnán Heaney of Queen’s University Belfast echoed that view, pointing to improved economic understanding and the widespread holding of strategic oil reserves as factors that work in the world’s favour.
President Donald Trump has sought to ease the blockage through a series of measures, including urging allied nations to provide naval escorts for tankers and issuing warnings to Iran over the safety of shipping passing through the strait.
With supply disruptions expected to persist well beyond any resolution of the immediate conflict, attention is likely to turn to how quickly emergency reserves can be deployed and whether diplomatic efforts can restore even partial access to the waterway. Experts say the best outcome — and the one that would most limit long-term economic damage — remains a swift end to the conflict.
