The Rundown - Deep Dive: Why the Strait of Hormuz Could Break the Global Economy

Episode Date: March 7, 2026

In this deep dive, Zaid breaks down why the Strait of Hormuz matters so much to the global economy, and why a prolonged disruption could send shockwaves through energy prices, inflation, and global economic growthFollow us on Instagram (@TheRundownDaily) for bonus content and instant reactions.Check out the Public app for incredible investing tools and to support the show (LINK)

Welcome back to the rundown for another weekend deep dive. Today, we are talking about the Strait of Hormuz. This narrow passage of water in the Middle East has been shut down, and it could potentially bring down the global economy. Oil tankers are stranded. Middle Eastern countries have stopped production of oil and natural gas, and prices are surging. So in today's episode, we're going to break down

why the Strait of Hormuz actually matters so much how this waterway has turned into a global economic pressure point and the potential impacts on the global economy if the strait is blocked for an extended period of time. We got a great one for you today. Let's dive in. Now, before we get into the chaos, let's start with the basics and take a look at geography. The Strait of Hormuz sits between Iran to the north and Oman to the south. This waterway connects the Persian Gulf, which is home to some of the largest oil-rich countries in the world,

to the Arabian Sea and the rest of the global shipping network. Countries like Saudi Arabia, Iraq, Kuwait, UAE, and Qatar ship oil and liquefied natural gas through this corridor. In fact, nearly one of every five barrels of oil consumed on Earth passes through this waterway. To give you some specific numbers, according to the energy analytics firm Kepler, roughly 13 to 15 million barrels of crude oil per day passed through the Strait of Hormuz in 2025. That represents about 31% of all seaborne crude oil flows worldwide. But it's not just crude oil, 20% of the world's liquefied natural. gas or LNG also moves through the Strait every day, mostly from Qatar. LNG is used for everything from heating homes to power generation to making fertilizer,

so we're not just talking about gas prices at the pump being affected. So that's why the Strait of Horm moves is one of the most important and closely watched choke points in the world. And right now, the traffic through the Strait has come to a standstill. Now, to be specific here, the Strait of Hormuz is still open. It's not like there's like a naval blockade or anything, but tanker traffic is down roughly 90% from normal levels since the U.S. and Israel first launched strikes on Iran about a week ago. Now, at first, many analysts thought this was because of an insurance issue.

You know, many insurance companies were pulling coverage for ships entering the region, but according to multiple reports, insurance is still available. The problem is that it's just too dangerous for these tankers and crews to cross the strait. Since the war started about a week ago, eight vessels have been struck. There's also reports of GPS jamming in the Persian Gulf, which is disrupting ship navigation. So that's why the traffic is at a standstill right now in the region. According to Reuters, roughly 200 vessels are currently waiting near major Gulf export terminals unsure on whether it's safe to move through the strait or not.

Now, earlier this week, President Trump said the U.S. Navy would escort tankers through the region and that the U.S. government would even provide insurance coverage. But there's no timeline for that. Plus, there might not be enough naval ships. You know, about 100 tankers and cargo vessels pass through the strait daily during normal conditions. And that's why some companies in ship, aren't waiting for things to calm down. At least three super tankers have already abandoned planned voyages to the Persian Gulf, rerouting instead towards the Atlantic Basin. The giant logistics

company Marisk, which controls about one-sixth of the global container fleet, suspended two of its container services through the strait. Now, you might be wondering, why can't these Gulf countries just bypass the strait? Well, unfortunately, the options are limited. Both Saudi Arabia and the UAE have pipelines that bypass the strait, but those alternative routes can only move about one-third of the oil that normally flows through the Strait of Hormuz. So that means that the Strait of Hormuz continues to stay closed. A massive chunk of the global energy supply literally has nowhere to go, and that is freaking out the markets right now. So how have oil markets responded to all this chaos? Well, they're kind of panicking right now. Before the U.S. and Israel launched their

strikes against Iran, crude oil was trading around $72 a barrel. Right now, as I record this, prices are over $90 a barrel. In fact, crude oil. prices have now gone up more than 50% in 2026. And depending on when you're watching this, that number might be much higher. And some of the forecasts coming from Wall Street are pretty alarming. Goldman Sachs just raised their Q2 forecast for international Brent crude oil. They said if volumes through the straight remain at the current levels for five more weeks, then Brent would likely hit $100 a barrel. Prices haven't been that high since Russia invaded Ukraine back in 2022. If you ask me, that $100 price target might be conservative because we might hit that by

Monday. According to the country of Qatar's energy minister, Sad al-Khabi, he told the financial times that crude prices could hit $150 a barrel in the coming weeks if tankers can't pass through the Strait of Hormuz. And he said that could bring down the economies of the entire world. And the thing is, even if the war ended tomorrow, he warned that it could take weeks to months to resume normal exports. And speaking of Qatar, things are a lot worse for natural gas prices. Qatar is one of the world's largest providers of LNG, and they had to stop protecting. on Monday after Iranian drone struck its facilities. Reuters reported that it might take at least a month to get back to normal production volumes,

even if conditions improve. And again, even if they're able to get back to peak production, if the street of Hormuz is blocked, there's no way for them to ship the product. So this is turning into a full-on crisis, and if you zoom out, the pain from this crisis isn't distributed equally. So let's talk about who's being impacted the most. The pain from this crisis will be felt more in some regions than others. Asia will likely get hit the hardest. About 80% of the oil in LNG that flows through the Strait of Hormuz

goes to Asian countries. That's why natural gas prices in Asia have literally doubled since last week. China might be one of the biggest losers here. They're the world's largest crude oil importer. And about 40% of the oil that China imports and 30% of its LNG imports pass through the Strait of Hormuz. Not to mention, China is also one of the biggest buyers of Iranian oil. They purchased over 80% of Iran's exports. So China is now exonerated. exposed on multiple fronts here. Now, China has been stockpiling oil at record levels, which gives them a bit of a buffer. But if this blockade for the Strait of Hormuz drags on, the buffer will run out. And that's why, according to multiple reports, China is in talks with

Iran to allow oil and gas tankers to pass through the Strait of Hormuz. And look, beyond China, other Asian countries are also exposed here, Japan, South Korea, India, they all rely on importing oil and natural gas for Middle Eastern countries. Europe is somewhat less directly exposed. They They only import about 10% of their LNG from Qatar through the Strait of Hormuz. But they are relying on getting jet fuel from these Middle Eastern countries. And that's why jet fuel prices have jumped about 75% since last week, which could make air travel more expensive in Europe. Let's talk about here in the U.S.

The impact won't be as bad. The U.S. is the largest producer of oil in the world. So they aren't depending on the oil coming from the Middle East. But here's the thing. Oil is priced globally. So when crude prices spike, gas at the pump in the U.S. goes up too. In fact, gas prices have already gotten. not more than 25 cents a gallon since last week.

So people are already starting to feel the pain at the pump. And the thing is, energy prices going up can have a cascading impact on the economy. So let's talk about it. All right, so now let's zoom out and talk about what the Strait of Hormuz blockade means for the broader global economy because the ripple effects go way beyond just energy prices. Analysts are coming out with a projection on what they think could happen. The IMF's managing director said a 10% increase in energy prices that last for a year would add about 0.4 percentage points to global inflation and shave maybe 0.1 to 0.2 points off of GDP growth.

Oxford economics that I jumped to $100 in oil could add about 0.7 percentage points to global headline inflation. Goldman Sachs is estimating more of a modest impact. They think this could be a 0.1% drag on global GDP growth and a 0.2 percentage points boost to headline inflation under their baseline scenario. Now, you might be thinking that these numbers sound pretty small, but you got to remember, central banks around the world have been fighting inflation for years. now. In fact, the U.S. Federal Reserve was just starting to get close to its 2% target, and this oil shock could throw all that progress out the window and force the Fed to wait on cutting interest rates. On top of that, rising energy prices also impact business confidence. J.P. Morgan's

chief global strategist David Kelly warned that when companies don't know what energy is going to cost next quarter, they pull back on hiring and investing and expansion. Energy is an input cost for basically everything. So when oil and gas prices go up, well, then shipping and transatlation. transportation prices go up. And when shipping prices go up, well, goods get more expensive. And when things get more expensive, consumers tend to pull back on spending. And when consumers pull back on spending, well, then economic growth slows down. So the economic impact of a small waterway being blocked in the Middle East are far-reaching. So what happens next? Well, I think the first thing to watch is how long this war will actually last. President Trump initially said the

conflict could take four to five weeks. But then on Friday, he posted on truth social that there would be no deal with Iran except unconditional surrender. So it looks like things are still escalating and neither sides seems to be ready to back down. But I wonder if the rising oil prices might force President Trump's hand. If you guys remember last year after the Liberation Day tariffs were announced, the bond market freaked out. And when that happened, that forced President Trump to back off the levels that he had initially proposed. So maybe the oil markets might force the same thing with the Iran situation. Now here's one thing that I do want to mention. If you look at the oil futures curve, the December crude prices are trading well below where the spot prices are trading

right now. That tells you the market believes that this is a temporary disruption and not a permanent shift. Traders are essentially betting that things will revert closer to normal by the end of the year. Now personally, I don't really have a prediction here. I do think, though, that the huge spike in oil prices is going to put pressure on President Trump to resolve things quickly, especially with the midterm elections right around the corner. I guess in the meantime, I wouldn't be surprised if oil and gas companies continue to outperform the rest of the market. Well, all right, guys, that's it for today's weekend, deep dive. Let me know what you guys thought about today's episode.

What do you think will happen to the oil markets? I mean, this is obviously a fast-moving situation. So by the time you listen to this, there might already be new developments. By the way, if you want to stay up the day on all this stuff every day, make sure you guys subscribe to the podcast. Just as a reminder in case anyone's new here, we post a 10-minute market update every day throughout the week. So it's a great way to stay in the loop

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