Following U.S. airstrikes on Iran, Iran’s parliament voted to close the Strait of Hormuz—a pivotal global energy artery that handles over 20 million barrels of oil per day, or roughly 20% of global petroleum consumption. If approved by Iran’s Supreme Leader, this would mark the first closure since 1972, choking off the primary sea route for crude exports from Kuwait, Qatar, Bahrain, and a large share of Saudi Arabia’s production.
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The closure would leave only limited pipeline capacity to reroute barrels—an estimated 65% drop in exportable volume according to market analysts. Already, more than 50 tankers scrambled out of the strait following the U.S. strikes. Oil prices, though markets were closed, are expected to gap significantly higher. JPMorgan labeled this its “worst-case scenario," warning that prices could spike to $120–$130/barrel, and inflation could quickly return to 5%, levels last seen in early 2023. Some forecasts even project $150–$200/barrel oil if a prolonged shutdown takes hold.
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For the Fed, this represents a brutal curveball. Energy prices have already risen ~$20 since April, adding ~40bps to inflation based on historical sensitivity models. While rate cuts were anticipated just days ago, markets are now confronting a new possibility: stagflation risk and policy reversal if this energy shock endures.

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