Middle East conflict escalates with Hormuz shipping halt raising oil, LNG, and fertilizer supply risks
Sectors & Industries
March 2, 2026
Table of Contents
Over the weekend, the U.S. and Israel launched major strikes across Iran targeting military and leadership sites. Iran’s Supreme Leader Ayatollah Ali Khamenei was killed in the attacks and replaced by an interim leadership council led by senior cleric Alireza Arafi, marking a major shift in the country’s leadership. Iran responded with missile and drone attacks across the region, and the conflict now appears likely to continue rather than end quickly.
The biggest economic risk comes from disruption in the Strait of Hormuz, the most important energy shipping route in the world. Iranian Revolutionary Guard transmissions warned vessels that no ships are allowed to pass through the strait, and shipping activity has largely halted. Multiple commercial vessels have already been attacked near the strait, with at least two ships struck by projectiles and another experiencing a nearby explosion. Tankers and LNG vessels have delayed or avoided transit, shipping insurers have raised prices or canceled policies, and many ships have reversed course or dropped anchor outside the entrance.
Even without a formal legal declaration, shipping behavior indicates the Strait is now effectively closed or heavily restricted, tightening global supply immediately.
The Strait of Hormuz carries a large share of global trade:
More than 80% of oil and gas shipments through Hormuz go to Asia, especially China, India, Japan, and South Korea.
Even moderate disruption can affect global supply because shipping, insurance, and transit delays reduce available volumes before any official closure occurs.
Markets are likely to react first through oil prices and shipping disruption, because energy supply moves immediately when shipping slows. Oil could move toward $80–$100 per barrel if disruption continues.
Even though OPEC+ agreed to increase output by about 206,000 barrels per day, the increase is small relative to global demand and does little if ships cannot move normally.
Historical market reactions suggest geopolitical shocks often cause short-term volatility rather than lasting declines.
During the January 2020 Soleimani strike:
During the June 2025 Israeli strikes on Iran:
These examples show that geopolitical shocks often create short-term spikes in oil and volatility, but markets can stabilize if energy flows continue.
Energy producers
Higher oil prices directly benefit major producers:
Because about 20% of global oil supply moves through the Strait of Hormuz, even moderate disruption can tighten supply and push crude prices higher.
LNG exporters
Roughly 20–25% of global LNG exports pass through Hormuz, so shipping disruption can tighten global gas supply and raise LNG prices.
Potential beneficiaries include:
If Middle East shipments slow, buyers must compete for replacement cargoes, which typically pushes LNG prices higher.
Defense companies
A longer conflict increases demand for weapons and replenishment:
Extended operations typically lead to increased orders and replenishment of munitions and defense systems.
Fertilizer producers
Disruptions to nitrogen fertilizer shipments could tighten global supply:
Because roughly one-quarter of globally traded nitrogen fertilizer passes through Hormuz, shipping disruption can affect agricultural supply and food production costs.
Shipping companies
Higher shipping risk and insurance costs can raise freight rates:
Shipping insurers have already raised prices and some companies have suspended Hormuz transit, which increases transportation costs and freight rates.
Airlines and transportation
Higher fuel costs would pressure margins:
Fuel is one of the largest costs for airlines, so rising oil prices directly affect profitability.
Import-heavy companies and supply chains
Higher shipping and energy costs increase costs across global supply chains. Delays through Hormuz can raise transportation costs and reduce inventory availability.
The most important question for markets is how long disruption in the Strait of Hormuz lasts.
If shipping normalizes quickly, markets may treat the conflict as a short-term shock similar to past Middle East events.
If disruption continues, higher oil prices, LNG prices, fertilizer costs, and shipping expenses could push inflation higher and increase market volatility across sectors.
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