IEA Calls Strait of Hormuz Closure the Largest Oil Disruption in Market History

The Strait of Hormuz is, in legal terms, open. In practice, it is shut. The International Energy Agency has called the de facto closure the largest single supply disruption in the history of the global oil market — a claim that, even allowing for IEA rhetorical inflation, lands hard against the data.

Roughly 20 million barrels per day of crude and condensate normally move through the strait, plus a fifth of the world's LNG. Since the US counter-blockade of 13 April, almost none of it has. Tankers wait off Fujairah and Khor Fakkan or reroute around the Cape of Good Hope, adding three to four weeks to delivery times and several dollars per barrel to landed cost.

Why insurance is now the binding constraint

The military risk is real but the deeper friction is financial. War-risk insurance for transits has spiked to multiples of pre-war levels, and several London market underwriters have stopped quoting on Hormuz routes altogether. Even when navies are willing to escort, charterers cannot place the cargo without cover. The market has effectively turned the strait into an uninsurable lane for most operators.

What is moving

Some flows continue. National oil companies with state-backed insurance — China's Unipec, India's IOC — have moved cargoes through the strait in convoy. The US Navy's Operation Project Freedom is escorting selected tankers, including the South Korean cargo vessel recovered on 4 May. Japanese-owned vessels have completed at least one transit, which Prime Minister Sanae Takaichi cited in her appeal to Iranian President Pezeshkian to keep the lane open.

None of that adds up to a functioning artery. The IEA's working assumption is that Hormuz is operating at less than 25% of normal throughput.

The reroute math

A VLCC from the Persian Gulf to Rotterdam goes from roughly 19 days via Suez to roughly 38 days via the Cape. That is a doubling of voyage time on the longest leg of the global oil supply chain, in an environment where the Suez route itself has been degraded since 2024 by Houthi activity in the Red Sea. The combined effect is the most expensive seaborne crude logistics environment in modern memory.

What it means for Europe

European refining margins on diesel are at multi-year highs. Aviation fuel hedging has become a board-level conversation at every European carrier. Inflation prints in May and June will carry the imprint of Hormuz, even where headline central-bank communication tries to downplay it. For Luxembourg, where transport, logistics and aviation occupy an outsized share of GDP, the closure is one of the most consequential external shocks of the year.