The Strait of Hormuz crisis: Impact on supply chain and the financial market

Key Takeaways:

• Asia is most dependent on crude passing through the Strait (45.7 percent of total imports), while Europe and Africa are most dependent on jet fuel from the Strait (roughly 40 percent); the Americas are not heavily reliant.
• A Strait blockade is expected to reduce major refined oil production, with most Asian economies reducing refined oil output by 30 percent, China is expected to reduce output by 50 to 70 percent, and Gulf nations by up to 90 percent.
• Asian economies import one-quarter of their LNG from Qatar. Taiwan, China is the most vulnerable because of its high reliance on LNG for electricity. South Asian dependence on Gulf LNG is also high. Europe is less reliant, given imports from the US, Russia, and Africa.
• In addition to energy markets, steel and aluminum production are also affected. Fertilizers and related inputs rely on the Strait. Global dependence on the Strait for sulfur and helium also poses risks to semiconductor production and the medical sector.
• Dubai’s stability is at risk, creating new opportunities for Singapore and Hong Kong.
  
  

This special release of Geoeconomic Dynamics Update examines how the 2026 War on Iran matters for global energy markets, production networks, and financial flows. At the center of this analysis is the Strait of Hormuz, the world’s most important energy chokepoint and the main maritime outlet for Gulf oil and liquefied natural gas exports. As the conflict entered its fourth week in March, what had initially been expected to remain a short confrontation had already evolved into a more prolonged regional war, with direct consequences for trade routes, energy facilities, and market confidence.

Our first focus is on the global supply chain. We ask two main questions: first, how is the energy market impacted, and what are its supply chain implications? Second, beyond oil and LNG, what other commodities and industries are likely to face disruption if the blockade and regional strikes persist? 

This release has a second focus as well: the financial and wealth-management implications of the conflict. The war has not only disrupted shipping and energy exports but has also weakened the perception of stability that underpins Dubai’s role as a trade, finance, and asset-holding hub. That raises a related set of questions for Asia. If security becomes a more visible risk in the Gulf, how might capital, wealth, and professional activity be reallocated? Why has Dubai been able to grow as a financial center in the first place, and to what extent can Hong Kong, China (hereafter “Hong Kong”) offer similar – or stronger – advantages in a period of prolonged regional uncertainty?

Taken together, the Gulf conflict matters not just because it threatens oil prices, but because it disrupts a much wider system linking energy, raw materials, shipping, aviation, food inputs, semiconductors, and international finance. The Strait of Hormuz is therefore not only a Middle Eastern security issue. It is a global supply chain issue, and increasingly, a question of market structure and financial geography as well.

1. How is the energy market impacted?

a. Oil 

Dependence on the Strait of Hormuz

The Strait of Hormuz is the primary export route for oil produced by Saudi Arabia, the UAE, Kuwait, Qatar, Iraq, Bahrain and Iran, especially for exports to Asia. It is the world’s most important energy chokepoint. Alternative export routes, such as the Abu Dhabi Crude Oil Pipeline (ADCOP) in the United Arab Emirates and the East-West Crude Pipeline in Saudi Arabia, offer a combined capacity of merely 3.5 to 5.5 million barrels per day (mb/d), which is insufficient to mitigate a sustained blockade.

Reliance on the Strait of Hormuz differs by product type and destination, because Gulf oil also moves through non-seaborne routes such as pipelines. At the global level, 30.7 percent of crude and condensate, 16 percent of gasoline and naphtha, 10.3 percent of diesel and gasoil, and 19.4 percent of jet fuel and kerosene pass through the strait.

At the continental level, Asia is the most reliant on the Strait of Hormuz. Imports passing through the waterway account for 45.7 percent of Asia’s total imports of crude and condensate, and 29.5 percent of its total imports of gasoline and naphtha. In turn, Asia absorbs 89 percent of all crude and condensate and 96 percent of all gasoline and naphtha transiting the Strait, as shown in Figure 2. By contrast, its reliance on the Strait for more refined oil products – diesel and gasoil, and jet fuel and kerosene – is relatively limited, at 8.3 percent and 4.2 percent of total imports, respectively.

Furthermore, Asia accounts for 14 percent of the Strait’s diesel and gasoil flows and 6 percent of its jet fuel and kerosene flows. This lower dependence reflects the region’s substantial refining capacity, which allows many Asian economies to produce these higher-value refined products domestically. China, in particular, now has the world’s largest oil refining capacity, at 18.5 mb/d, and is a major producer and exporter of diesel, gasoline, and jet fuel.

It is important to note that while transportation of oil into Asia is under most risk, major Asian economies have been preparing for a geopolitical shock that could risk supply: China has been stockpiling 1.3 billion barrels by March 2026, according to Kpler estimates, which is roughly 120 days of consumption, Japan has about 470 million barrels enough to cover 254 days of domestic consumption, South Korea holds approximately 190 million barrels against roughly 60 days of domestic consumption, making it the most vulnerable among the East Asian economies discussed here.

The Americas are the least reliant on oil transiting the Strait of Hormuz, reflecting a combination of ample domestic supply, substantial refining capacity, and the region’s geographic distance from the Gulf. Still, roughly 12.5 percent of crude and condensate imports into the Americas pass through the Strait of Hormuz, while almost no gasoline and naphtha imports rely on the route. Dependence on the Strait for diesel and gasoil, and for jet fuel and kerosene, is also limited, at roughly 2 percent in each case.

For Europe, dependence on the Strait of Hormuz for crude oil is relatively limited, accounting for only 5.2 percent of total imports. This may seem counterintuitive given Europe’s geographic proximity to the Middle East. In practice, however, Europe’s exposure is moderated by a combination of domestic production and more secure seaborne and pipeline supplies from the Americas and North Africa. Figure 3 shows the top five sources of Europe’s crude imports from 2021 to 2024 based on Eurostat data. Among these, only Iraq and Saudi Arabia are Middle Eastern suppliers directly affected by a Strait of Hormuz disruption. Most of Europe’s crude instead comes from more secure sources, including Norway (14 percent in 2024), the United States (15 percent), Kazakhstan (11 percent), and Libya (7 percent).

European dependence on the Strait is higher for diesel and gasoil, at 8.9 percent. The greatest vulnerability, however, lies in jet fuel and kerosene. Europe sources 38.9 percent of its jet fuel and kerosene imports through Hormuz, a disproportionately high share driven by strong regional demand and weakening domestic production. This reflects refinery closures linked to stricter environmental rules and rising operating costs, as well as a historical refining structure more oriented toward diesel than jet fuel. The result is a structural dependence on imported Middle Eastern jet fuel. Under current market disruption, this carries important implications: a prolonged blockage would place serious pressure on European airline operations, cargo aviation, and airport fuel supply, especially for carriers already operating on thin margins and tight schedules. In turn, this would create broader risks for both tourism and high-value air freight.

Africa has the highest dependence on the Strait of Hormuz for imports of Jet Fuel (40.9 percent) and Diesel (23.4 percent), indicating a relative lack of refining capacity. Africa faces a similar issue to Europe, but these impacts are more painful for the mostly developing or underdeveloped economies in the region. Prolonged disruption of the Strait would lead to rapid increases in transport and electricity costs, particularly for economies reliant on diesel generation or imported fuel for port and trucking operations – which would affect infrastructure development and trade across the region.

How the Strait crisis impact oil export, and further impact supply chains

Prolonged Strait conflict directly reduces the crude input for Asian refineries, subsequently impacting downstream refined products production and export across the region until July 2026: in total, around 785 kb/d of gasoil and diesel, 722 kb/d of gasoline, and 309 kb/d of jet fuel are expected to be lost based on current situation, resulting in significant impact to the global energy and petrochemical sectors. The production shock is expected to peak in May and gradually ease by July.

At the country level, the economies expected to see the largest export reductions through May are Bahrain and Kuwait, with estimated declines of 70 to 90 percent, followed by the UAE at 60 to 80 percent and the Chinese Mainland at 50 to 70 percent. Most of the remaining economies in the cohort are expected to reduce refined oil exports by roughly 10 to 30 percent. Oman appears to be the least affected exporter, with an estimated decline of only around 10 percent.

These export reductions in Asia-Pacific and the Gulf together create supply chain disruptions to global transportation, petrochemical manufacturing, and power generation. Gasoline serves as the standard fuel for light passenger vehicles, while Naphtha functions as a critical ingredient for petrochemical cracking, serving as the foundation for plastics, packaging materials, synthetic textiles, and various consumer and industrial goods. Consequently, a disruption in the Strait would impact Asia through two concurrent channels: constrained gasoline supplies for light transport and elevated input costs for petrochemical manufacturing. This dual shock is particularly relevant for regional economies with extensive refining and chemicals sectors, where supply chain disruptions would propagate from fuel markets into downstream industrial materials and electronics.

Gasoil and diesel, categorized as middle to heavy distillates, are the primary fuels for commercial logistics networks, including maritime shipping, rail freight, and heavy road transport, as well as industrial machinery. Supply chain interruptions here would disproportionately impact freight transport and industrial operations in Africa and Europe, potentially increasing logistical costs across adjacent economic sectors.

Jet fuel and kerosene are middle distillates critical for commercial aviation and domestic heating or cooking in various emerging economies. Their reduced supply carries direct implications for commercial aviation, passenger connectivity, and energy supply. A prolonged disruption would severely strain European airline operations, cargo aviation, and airport fuel supplies, particularly impacting carriers managing narrow margins and complex scheduling. This subsequently introduces risks for both the tourism sector and high-value air freight. In Africa, the socioeconomic implications are broader, as kerosene remains a vital commodity for household and commercial energy use in several regional markets. Ultimately, while crude disruptions would shock Asian industrial supply chains, a jet fuel and kerosene deficit would directly impair European aviation networks and specific African domestic energy systems.

b. Natural Gas

In 2024, about 20 percent of global liquefied natural gas (LNG) trade transited the Strait of Hormuz, primarily from Qatar, the world’s second largest global LNG exporter. LNG is primarily used for generating electricity, heating residential and commercial buildings, as well as for industrial production.

 
Asian economies import roughly one-quarter of their LNG from Qatar. Among the selected economies, Taiwan, China is the most dependent on Qatari LNG, with more than one-third of its total LNG imports coming from Qatar, followed by the Chinese Mainland at around 30 percent. South Korea and Japan are less exposed, with Qatari LNG accounting for about 15 percent and 5 percent of their imports, respectively. South Asia, however, appears even more vulnerable to Gulf LNG supply. According to IEEFA data, India imports 9.45 million tons of LNG from Qatar and another 2.76 million tons from the UAE, together accounting for nearly 60 percent of its total LNG imports. Qatari LNG similarly makes up 57 percent of Bangladesh’s imports, leaving both economies particularly exposed to any blockade of the Strait of Hormuz.

Compared with the rest of the Asian economies included here, China is the most resilient in terms of LNG supply security because domestic production covers nearly 60 percent of its gas consumption. More broadly, natural gas accounts for 7.9 percent, 20.9 percent, 19.7 percent, and 23.9 percent of total energy supply in the Chinese Mainland, Japan, South Korea, and Taiwan, China, respectively.

European dependence on the Strait of Hormuz is limited relative to its access to Atlantic LNG supplies and pipeline imports. Qatari LNG accounted for about 11 percent of Europe’s import mix in late 2024, falling further to 8 percent in the first half of 2025. Over the same period, Europe deepened its reliance on the United States, whose market share rose from 44 percent to 57 percent. Russia (13 percent), Algeria (7 percent), and Nigeria also remain relevant suppliers. As a result, the main risk to Europe from a Middle Eastern conflict is less a direct physical shortage than price spillovers. Any disruption in the Strait would intensify global competition for non-Gulf cargoes, pushing European benchmark prices higher as Asian buyers compete for the same Atlantic supplies.

2. Beyond the Energy Market

In addition to the energy market, the conflict in the Strait of Hormuz is also disrupting the transport and production of key metals, fertilizers, and important raw materials for advanced production such as semiconductors.

Metal Production

The Iran–US/Israel war is likely to disrupt iron ore pellet supply from the Middle East while also weakening regional steel demand. In 2025, Iran and Bahrain together accounted for roughly 18 percent of global seaborne pellet exports, and shipments from both are now exposed to conflict-related disruption. On the steel side, the war is likely to interrupt not only Iran’s own exports, but also steel imports into other Gulf economies, which could weigh on construction and industrial activity across the region. China is also likely to be affected indirectly: its pellet imports from the Middle East may decline, while its steel exports to the region could also come under pressure as demand weakens.

Aluminum production in the Gulf reached around 6.3 million tons in 2024, accounting for roughly 8 to 9 percent of global output and nearly 23 percent of supply outside China. Iran and the Gulf Cooperation Council (GCC) countries together therefore represent a significant part of the global aluminum market, especially at a time when the market is already facing a structural deficit of around 600,000 tons. Under these conditions, even a partial disruption to Gulf production or exports could tighten supply quickly and trigger further price increases. In Iran, around 80 percent of operating primary aluminum capacity is now at risk. The conflict has damaged electricity infrastructure and constrained access to alumina feedstock, of which the country produces only about 20 percent domestically. Although roughly two-thirds of Iranian aluminum output is consumed locally, potential export losses of around 0.20 Mt would still add to tightening conditions in the global market.

Fertilizers and Raw Materials

Roughly 16-18 percent of fertilizer exports originate in the Middle East, with the Strait of Hormuz accounting for one quarter of the sector’s global seaborne exports. Key fertilizers and fertilizer inputs produced in the region are: natural gas (as addressed in the previous section), ammonia, urea, phosphate fertilizers and sulfur. The Fertilizer Institute divide fertilizer-exporting countries in the Gulf by two types: “High-risk” exporters are those that are directly involved in the conflict or depend on the strait as their primary shipping route, this includes Bahrain, Kuwait, Iran, Israel, Saudi Arabia, Qatar, and the UAE; and “At-risk” exporters are those with access to alternative shipping routes, but could still face indirect market disruptions, which are Egypt, Jordan, Lebanon, Oman, Syria. The following figure visualizes the share of High-Risk and Low-Risk exporters in global fertilizer market:

i. Nitrogen Fertilizers (Ammonia and Urea)

Nitrogen fertilizers are used to significantly increase crop yields, promote foliage growth, and improve green color in plants by supplying essential nitrogen needed for protein production and plant energy that is often lacking in soil. Two major nitrogen fertilizers that are mass-produced in the Middle East are Ammonia and Urea. High-risk and At-risk accounted for 30 percent of global ammonia exports in 2024. Major exporters in the region include Saudi Arabia (14 percent), Iran (5 percent) and Egypt (4 percent). Urea, produced from ammonia, also has significant exposure. Nearly 49 percent of global urea exports originate from countries potentially affected by regional instability. Major exporters include Iran (11 percent), Qatar (11 percent), Saudi Arabia (8 percent) and Egypt (8 percent).

ii. Phosphate Fertilizers (MAP, TSP, DAP)

Phosphate fertilizers are essential agricultural nutrients derived from rock phosphate, used primarily to boost plant phosphorus levels, aiding energy transfer, photosynthesis, and root development. They increase crop yields, encourage early maturation, improve resistance to disease, and support strong stem/seed development. More than 30 percent of global DAP exports, around 13 percent of global MAP exports, and 26 percent of global TSP exports are tied to the Middle East.

For DAP and MAP, Saudi Arabia is the most important producer and exporter. In 2024, Saudi Arabia accounted for around 23 percent of global DAP exports and 13 percent of global MAP exports. At-risk exporters, including Egypt and Jordan, accounted for a further 7 percent of global DAP exports.

For TSP, high-risk exporters account for about 14 percent of global exports, driven largely by Israel, while at-risk exporters – including Lebanon (6 percent) and Egypt (6 percent) – contribute another 12 percent.

iii. Sulfur

Sulfur is itself an important fertilizer input, and its main derivative, sulfuric acid, is essential to phosphate fertilizer production. The Middle East is a major hub for sulfur supply because sulfur is produced as a by-product of oil and gas refining. Sulfuric acid is then used to process phosphate rock into fertilizers such as DAP, MAP, and TSP. In 2025, countries classified as high-risk accounted for about 41 percent of global sulfur exports, while Iran contributed another 4 percent. At-risk countries accounted for roughly 1 percent more. Taken together, nearly half of global sulfur trade is tied to countries exposed to potential disruption associated with the Strait of Hormuz.

The supply chain implications go beyond fertilizer. Sulfur is also an important input in both metal processing and semiconductor manufacturing. In metal production, sulfur serves mainly as a reagent for extracting metals from sulfide ores – including cobalt, copper, lead, nickel, and zinc – either through roasting and smelting or through conversion into sulfuric acid for hydrometallurgical leaching. In semiconductor production, ultra-high-purity sulfuric acid is used in wafer cleaning to remove organic residues and in etching processes during chip fabrication. As a result, any sustained disruption in sulfur supply would not only tighten fertilizer markets, but could also raise input costs in metals refining and selected parts of the semiconductor supply chain.

iv. Helium

More than a quarter of global helium supply comes from Qatar and passes through the Strait of Hormuz, making it another material exposed to disruption if the conflict persists. While helium is often treated as a niche commodity, it is strategically important to several advanced industries. In semiconductor manufacturing, helium is used to cool equipment involved in chip production. This matters at a time when AI-driven demand has already tightened global chip supply chains, raising the risk that any additional disruption in helium availability could worsen existing shortages and add further pressure to electronics prices, including smartphones and computers.

Helium is also important in the medical sector, especially for cooling MRI machines. Although firms and hospitals have adapted by improving recycling and diversifying supply sources, these buffers are limited. A prolonged disruption would therefore not simply affect industrial production, but could also increase costs in healthcare and other sectors that rely on stable helium supply.

3. Middle East Conflict on the Financial Market

In addition to disrupting regional supply chains, the conflict has hit Dubai particularly hard. While many of its Gulf neighbors remain primarily concerned with energy production and exports, Dubai’s economy is centered on services, trade, finance, and tourism, all of which depend heavily on the safety and stability of the Gulf region. In this sense, the conflict strikes at the foundations of Dubai’s growth model more directly than it does in neighboring economies.