Strait of Hormuz Disruption and Implications for Risk, Continuity, and Strategic Response

The Strait of Hormuz remains one of the world’s most critical geopolitical and economic chokepoints, with approximately 20% of global oil and a significant share of LNG (liquefied natural gas) transiting through it. Current tensions and disruptions are not only affecting energy markets but are cascading across global supply chains, shipping systems, and financial markets.

For executives, this is not solely a regional or energy-sector issue. It represents cross-enterprise risk with implications for cost structures, operational continuity, and strategic planning. The Strait of Hormuz has re-emerged as a defining pressure point in the global economy not simply because of its geography, but because of what flows through it. When disruption occurs, the effects do not remain contained within energy markets; they propagate across supply chains, pricing systems, and financial markets with remarkable speed.

What makes the current situation particularly consequential for executives is not just the potential for interruption, but the breadth of interdependence it exposes. Energy is embedded in nearly every product and service. Shipping is the connective tissue of globalization and trade. When both are simultaneously stressed, organizations experience not only rising costs, but also reduced predictability which is arguably the more strategic risk.

This is therefore not a “watch the headlines” moment. It is a moment that calls for enterprise-wide interpretation and response.

Systemic Disruption in Motion

The closure of the Strait of Hormuz amid the Iran-Israel-USA war is rapidly translating into measurable economic damage, and the worst may be yet to come. Rising oil prices, along with supply and transshipment disruptions, are already destabilizing the global economy. The U.S. benchmark West Texas Intermediate (WTI) crude is hovering between $90 and $100 per barrel, while international benchmark Brent crude has already briefly surpassed $115. Global equities are slumping, with Asian markets plummeting by an average of 5% since the start of the conflict in early March, 2026. U.S. and European markets which proved more resilient initially, are also at risk of stagflation. At least 3,000 ships typically pass through the Strait, and the closure is forcing the majority to a standstill, with only limited exceptions permitted by Iran. At least 21 vessels, including merchant ships, have been attacked with missiles, drones, and other projectiles. There are reports that Iran is charging some ships transit fees of up to $2 million per voyage, although Iranian officials have denied the claim. Whether Iran is levying transit fees or not, rising freight insurance premiums, rerouting costs, and higher logistics rates are already placing significant strain on global trade. These disruptions are already rippling across global energy and trade flows, reshaping the global supply chains for energy, fertilizers, pharmaceuticals, and goods originating in the Middle East.

The cumulative supply of oil through the Strait accounts for approximately 20% of the global oil supply, with nearly 80% of this supply destined for Asian markets. In addition, about 20% of global Liquefied Natural Gas (LNG) shipments transit through this strait. Ongoing attacks and counterattacks have already damaged at least 39 energy facilities, including oil refineries, natural gas fields, and other energy sites across nine countries in the region. Among the most significant incidents are those affecting Iran's largest gas field, South Pars, as well as Qatar's Ras Laffan LNG export terminal. Ras Laffan, the world’s largest LNG terminal, sustained damage that compromised approximately 17 percent of Qatar’s LNG export capacity, with repairs expected to take a minimum of five years.

Against this backdrop, even a conservative three-quarter closure of the Strait could push WTI crude prices to as high as $132 per barrel and lead to a contraction of at least 1.1% in global economic output.   

Figure 1: WTI Oil Price: Percent deviation from baseline

Source: Federal Reserve Bank of Dallas. Chart reconstructed using data available at: https://www.dallasfed.org/research/economics/2026/0320.    

The crisis extends well beyond energy. Approximately 33% of globally traded fertilizers pass through this strait. Even a short-term closure can have severe consequences for global food security, with the greatest impact falling on lower-income countries such as Sudan, Somalia, Tanzania, and Mozambique.     

Figure 2: Disruptions in the Strait of Hormuz could worsen fertilizer access for some of the poorest countries.

Source: UN Trade and Development, data is available at https://unctadstat.unctad.org/datacentre/.  

In addition, the Middle East exports vast quantities of aluminum, petrochemical-based synthetic rubbers and related rubber precursors (like butadiene, ethylene glycol, and polymers) to Asia and Europe. Other goods traded through this route include batteries, electronics, pharmaceuticals, and ready-made garments from Asia. The closure is significantly disrupting trade in these products. The United Arab Emirates, Qatar, and other Gulf Cooperation Council (GCC) countries, which have become major global business hubs, are reportedly losing up to $2 billion because of disruptions in the Strait of Hormuz.

Amid the closure, Russia, China, and even Iran may emerge as key beneficiaries. Despite widespread supply chain disruptions, China stands to gain strategically, as Iran has reportedly allowed only Chinese-affiliated vessels to transit the strait. Iran, for its part, is also benefiting from elevated oil and gas revenues despite sustaining significant military damage. This calculation has been further supported by the Trump administration’s temporary lifting of sanctions on Iranian crude sales at sea amid soaring prices.

However, the biggest winner appears to be Russia, for whom this crisis represents an unintended windfall. The U.S. has eased sanctions on Russian crude, enabling Russia to earn millions of dollars in additional revenue for each day the strait remains closed, with Asian imports of Russian fuel set to reach record highs. As Middle Eastern exports of fertilizers, aluminum, and other critical raw materials are disrupted, Russia is well positioned to fill the gap. Already a dominant player in global agricultural inputs, accounting for 23% of global ammonia exports and 14% of urea, Russia stands to gain billions in additional revenue by substituting for Middle Eastern suppliers, provided the disruption persists.

In this context of asymmetric conflict, disruptions are not always linear or predictable. Weaker actors often target vulnerable infrastructure and commercial assets, increasing uncertainty for firms operating both within and beyond the region.

What Executives Should Be Interpreting and Not Just Observing

The most effective leadership teams will look beyond surface-level indicators and instead interpret how signals translate into operational and strategic consequences.

Energy volatility, for example, is not only a procurement issue. Sustained price increases affect manufacturing margins, transportation costs, and even labor markets as inflationary pressures build. For firms operating across regions, the asymmetry of impact—particularly between energy-importing and energy-producing economies — can create uneven performance across portfolios.

At the same time, maritime disruption is rarely linear. A delay in one chokepoint quickly cascades into congestion elsewhere. Shipping routes are reconfigured, vessels are redeployed, and insurance markets tighten. The result is not simply slower delivery times, but a systemic repricing of risk across global logistics networks.

Perhaps more important and often less visible are second-order supply chain effects. Many industries are indirectly dependent on the Gulf through energy-intensive inputs such as petrochemicals, fertilizers, metals processing, and industrial gases. These dependencies are often several tiers removed from direct suppliers, making them harder to detect and slower to respond to — this is where disruption becomes strategic rather than operational.

Overlaying all of this is the potential for policy and regulatory response, which can shift the landscape quickly and unevenly. Government interventions, whether through strategic reserves, sanctions adjustments, or maritime security measures, can stabilize or complicate markets depending on timing and coordination. Even the discussion of new transit controls or fees signals a willingness to use infrastructure as leverage, which has longer-term implications for global trade assumptions.

Less visible, but equally critical, are reputational and compliance risks. Periods of conflict often test governance systems; firms must ensure adherence to sanctions, anti-corruption standards, and ethical commitments, as these risks persist long after the crisis subsides. 

Where Leadership Attention Should Focus

In this environment, the central challenge is not simply reacting to disruption, but understanding where exposure truly sits within the enterprise. Key questions include: Where are we dependent on Gulf-linked energy or shipping? How sensitive are margins to sustained cost increases? Which supply chains rely on energy-intensive or geographically concentrated inputs? How flexible are contracts and supplier relationships under stress?

These questions matter because the most significant risks are often hidden in indirect dependencies and rigid structures, not in the most visible parts of the business. There are also longer term, strategic questions. While we cannot predict when this conflict will be resolved, it is increasingly clear that firms will need to be risk-ready and resilient. Three areas are particularly important for long term planning: security, sourcing location, and energy infrastructure.

First, on security, firms may need to move beyond reliance on state protection and consider layered risk mitigation strategies. This could include contracting private maritime security, investing in real-time vessel tracking and intelligence, and working more closely with insurers and naval coalitions. While private security raises legal and reputational considerations, the broader shift is toward treating supply chain security as a strategic function, not just an operational one. Over time, we may see security become embedded in procurement and logistics decisions in the same way cost and efficiency are today.

Second, firms should reassess sourcing and production geography. A blockage highlights the risks of concentrating critical inputs in regions dependent on a single chokepoint. Diversification does not necessarily mean abandoning the Gulf, but it does imply developing redundant supply channels: alternative suppliers in the Americas or Africa, dual sourcing strategies, and in some cases partial reshoring or nearshoring. The ability to shift sourcing quickly when disruptions occur is critical. It is the Gulf today, but it could be elsewhere tomorrow.

Third, and perhaps most structurally important, is energy strategy. Recurrent geopolitical shocks strengthen the business case for reducing exposure to volatile fossil fuel supply chains. For many firms, this could mean accelerating investments in electrification, renewable energy procurement, and energy efficiency. Rather than viewing the energy transition purely through a sustainability lens, companies may increasingly frame it as a risk management strategy to insulate operations from geopolitical volatility and price shocks. 

Actions for Executives

A measured response does not require dramatic restructuring, but it does require faster visibility, tighter coordination, and disciplined scenario planning. Executives should prioritize three areas of action:

1. Build a clear map of exposure
This goes beyond tier-one suppliers. Organizations should identify where energy, logistics, and regional dependencies intersect across the value chain. The goal is not perfect information, but sufficient clarity to anticipate where pressure will emerge first.

2. Move from forecasting to scenario planning
Traditional forecasts assume relative stability. In this context, leadership teams should instead consider defined scenarios — 30, 60, and 90 days of sustained disruption — and assess implications for cost, capacity, and continuity. This allows for faster, more confident decision-making if conditions deteriorate.

It’s important to keep in mind that even if all hostilities in the region ceased immediately, there would still be weeks or even months of disruption in energy supplies as a result of damage to energy facilities and energy-related infrastructure.

3. Strengthen flexibility — operationally and financially
Flexibility becomes the most valuable asset in uncertain environments. This includes:

• Diversifying sourcing and logistics pathways where feasible. 

This could include building relationships with multiple carriers and diversifying suppliers geographically (“nearshoring” and “friendshoring” are useful approaches to take into account).

• Building in a buffer of inventory to anticipate shortages or sudden cutoffs of supplies. 

Although this would increase costs, in this case, to ensure continuity of operations, buffer stocks are even more important than maximizing efficiency, at least for the duration of the conflict. These can be maintained in multiple locations — the U.S., Europe, and Asia, for example.

• Reviewing contract structures for pricing and delivery adaptability

The goal is to identify opportunities within your contracts that provide the necessary flexibility and adaptability to shift dynamically, recognizing that pricing and delivery will likely have to shift more than once.

• Ensuring sufficient liquidity and financial resilience to absorb short-term shocks.

In addition to maintaining liquidity, companies should employ a financial hedging strategy to anticipate significant fluctuations in currency markets.

4. Obtain political risk insurance 

If a company has not done this already, it is still possible to do so, although premiums may be significantly higher and coverage may be more limited. For companies specifically involved in maritime trade in the Gulf region, the U.S. International Development Finance Corporation has increased its reinsurance guarantees (insurance for insurance companies, specifically select companies partnering with the DFC on this, such as Chubb). 

While the World Bank’s Multilateral Investment Guarantee Agency (MIGA) also offers political risk insurance, this generally applies to risks against specific government actions such as expropriation, restrictions on repatriation of profits, or the imposition of currency controls, not to the kinds of specific trade-related risks in this current conflict. For that, commercial insurance companies that provide this kind of risk protection (as noted above) are needed.

5. Integrating short-term agility with long-term strategy

Firms must institutionalize long-term planning alongside crisis response. This means embedding scenario planning, geopolitical risk assessment, and supply chain stress-testing into core strategy, so that immediate adjustments (rerouting shipments, switching suppliers) are aligned with broader goals like diversification, energy transition, and resilience-building. Companies that successfully bridge short-term flexibility with long-term strategic planning will be better positioned to navigate this crisis, as well as a more persistently volatile global environment.

6. Protect people and critical assets

Ensure the safety of employees (including relocation or support for local staff where needed) and strengthen protections for physical infrastructure, data systems, and cybersecurity in an environment of heightened risk.

Executive Perspective

What distinguishes this moment is not simply the presence of risk, but the convergence of multiple systems under stress. These systems are energy, logistics, and geopolitics. Each on its own represents a significant challenge but is manageable. Together, they create compounding effects that challenge traditional planning assumptions.

A neutral, effective executive posture is therefore one of disciplined attentiveness: avoiding overreaction while moving quickly to increase visibility and optionality.

Leaders should frame the situation across three time horizons:

• Near-term: Maintaining operational continuity amid disruption.
• Medium-term: Managing cost pressures and margin resilience.
• Long-term: Reassessing structural dependencies and strategic positioning.

Bottom Line

The Strait of Hormuz is not just a geographic chokepoint. It is a systemic stress point for the global economy. For executives, the imperative is not to predict outcomes, but to prepare organizations to operate effectively across a range of plausible scenarios.

Those who invest early in understanding exposure, enhancing flexibility, and aligning decision-making will be better positioned — not only to manage disruption, but to navigate what may become a more persistent era of volatility.