Why the closure of Strait of Hormuz is causing fears about elevating crude oil prices? Premium

The closure of the Strait of Hormuz raises concerns about rising crude oil prices amid escalating tensions in West Asia.

The story so far: Global oil markets are bracing for a potential upward price shock as trade resumes Wednesday amidst escalation of hostilities in West Asia, as Israel and its ally United States (U.S.) launched air strikes against Iran on Saturday (February 28, 2026), with Tehran acting in retaliation.

More importantly for the oil market, Tehran has announced the closure of Strait Of Hormuz, which accounts for approximately one-fifth of the global crude oil flow, following the death of their supreme leader Ayatollah Ali Khamenei. At close of trade on Friday (February 27, 2026; 7:29 p.m. GMT), Brent Crude futures for April were trading near flat at $72.52 per barrel.

The Strait of Hormuz is an essential chokepoint that connects the Persian Gulf with the Gulf of Oman and Arabian Sea. For perspective, chokepoints are narrow channels along widely used global sea routes that are utilised for transporting oil through sea. The closure of a chokepoint, even if for a temporary period, can translate to potential delays in supply, reduction in traffic and rise in shipping and insurance costs. All of it culminating into increased price of crude. Though alternatives exist for some chokepoints, but they could entail significant increase in transit times.

The closure of the Strait would translate to New Delhi being barred access to Suez Canal and the Red Sea. This is expected to have cost and time escalations for Indian exporters utilising the maritime route.

Further, the Paris-headquarterd International Energy Association (IEA) observed in June last year, that the Strait served as the exit route from the Gulf for approximately one-fourth of the global oil supply including from major oil-producing nations Saudi Arabia and United Arab Emirates alongside Kuwait, Qatar, Iraq and Iran itself.

From the larger perspective of trade, S.C. Ralhan, President of the Federation of Indian Export Organisations (FIEO), said, “If diversions become prolonged, shipments may increasingly have to reroute via the Cape of Good Hope, adding an estimated 15–20 days to transit time for Europe and the United States.”