20% of global oil at risk as Hormuz blockade halts ships; crude surges 36% in a week of Iran Israel conflict

Asian economies could face severe energy and economic disruptions after navigation through the Strait of Hormuz was effectively halted following a warning broadcast by Iran’s Revolutionary Guard Corps Navy, raising fears of supply shocks across the region that relies heavily on Middle East oil and gas.

On February 28, vessels transiting the strategic waterway reported receiving an urgent message over VHF Channel 16, the international maritime distress frequency, stating that all navigation through the strait was forbidden until further notice, a report in Nikkei Asia stated. The announcement immediately triggered alarm across global shipping and energy markets, but the potential fallout is expected to be most significant for Asian countries that depend on uninterrupted flows of crude oil and liquefied natural gas (LNG) from the Gulf.

The Strait of Hormuz is one of the world’s most critical energy chokepoints, carrying roughly a fifth of global oil trade and a large share of LNG shipments. Any disruption to this narrow passage threatens to ripple across global markets, but import-dependent Asian economies such as India, China, Japan and South Korea are among the most exposed.

Scale of disruption

The scale of disruption is already visible. More than 200 ships are stranded inside the Persian Gulf and over 150 vessels are waiting outside the strait, while hundreds of oil tankers remain delayed as insurers and shipping companies reassess risks. Around 38 Indian ships are reported stuck in the region, and several tankers carrying crude to Asia, including Russian cargoes bound for India, are unable to move freely. Roughly 20% of global oil supply passes through the Strait of Hormuz, making even temporary disruption a major shock to energy markets.

Oil volatility

The impact has quickly spilled into prices. Data on historical oil volatility shows that weekly moves of this scale are rare. According to long-term market data, the latest surge in crude prices ranks among the largest weekly jumps in decades, with WTI crude rising about 36% in a single week to around $91 per barrel, one of the biggest gains since the sharp rebound seen after the 2020 oil crash. Previous spikes of similar magnitude have typically coincided with geopolitical crises, wars or major supply shocks, underlining the sensitivity of oil markets to disruptions in the Gulf.

Asian economies at risk

For Asian economies, the risks extend far beyond higher fuel costs. India imports more than 80% of its crude oil, while Japan and South Korea rely heavily on Middle Eastern energy supplies. China, the world’s largest crude importer, also sources a large share of its oil from the Gulf, much of which must pass through Hormuz.

Energy traders say the blockade has already created uncertainty around cargo schedules, with some vessels delaying entry into the Gulf while insurers raise premiums. Higher freight and insurance costs alone can push up the landed price of crude for Asian buyers, increasing pressure on inflation and trade balances.

Analysts warn that the impact could spread across the broader economy. Higher oil prices can raise transportation costs, fertiliser prices, chemical production expenses and electricity tariffs, eventually feeding into food inflation and manufacturing costs. Countries may be forced to draw from strategic reserves or seek supplies from the United States, Africa or Latin America, but those alternatives are limited in the short term.

Governments across Asia are closely monitoring the situation and reviewing contingency plans, yet the Strait of Hormuz remains difficult to replace due to the sheer volume of oil that flows through it.

If the blockade continues, the consequences could extend beyond the energy sector, reshaping trade flows, pushing inflation higher and exposing how deeply Asian growth depends on the uninterrupted flow of oil through one of the world’s most fragile chokepoints.