February 28, 2026: The Worst Weekend for Global Energy Markets
The US and Israel launched joint airstrikes on Iran, targeting sites including Supreme Leader Khamenei's residence. Iran retaliated immediately, with its Revolutionary Guards broadcasting VHF warnings to all vessels: no passage through the Strait of Hormuz.
Though Iran never formally declared a blockade, the warnings and subsequent attacks on ships caused a sharp 70% drop in traffic, with over 150 tankers anchoring outside the strait to avoid risks. The strait handles roughly 20 million barrels of oil daily, or about 20% of global consumption. It also carries around one-fifth of the world's liquefied natural gas trade, primarily from Qatar.
Brent crude surged from approximately $72 per barrel at Friday close to $80 in early Monday Asian trading — an 11.1% increase within 48 hours. War-risk insurance premiums jumped 50%, affecting global trade.
Why the Strait of Hormuz? A 21-Mile-Wide Global Economic Chokepoint
The navigable shipping channel at the Strait of Hormuz's narrowest point spans just two miles in each direction, yet through this corridor flows a volume of hydrocarbons that underpins the functioning of the global economy. The strait sits between Iran and Oman and the UAE, connecting the Persian Gulf to the Gulf of Oman.
According to the US Energy Information Administration, about 20 million barrels of oil, worth about $500 billion in annual global energy trade, transited through the Strait of Hormuz each day in 2024. The crude oil passing through the strait originates from Iran, Iraq, Kuwait, Qatar, Saudi Arabia and the UAE.
The strait also plays a critical role in liquefied natural gas trade. In 2024, roughly a fifth of global LNG shipments moved through the corridor, with Qatar accounting for the vast majority of those volumes. Crucially, 84% of crude oil and condensate shipments transiting the strait headed to Asian markets in 2024.
A full closure of the Strait of Hormuz would remove approximately 20 million barrels per day from global markets — roughly 20% of world petroleum liquids consumption and 27% of seaborne oil trade.
The UAE's Backup Plan: How Much Can the Fujairah Pipeline Save?
When the Strait of Hormuz effectively shut down, the UAE wasn't left without options. The Habshan-Fujairah oil pipeline (ADCOP), operational since 2012, was built precisely for this scenario.
The UAE operates a pipeline that bypasses the Strait of Hormuz. This 1.8 million-barrel-per-day pipeline links onshore oil fields to the Fujairah export terminal in the Gulf of Oman. In 2024, crude oil and condensate volumes originating in the UAE and traversing Hormuz were 0.4 million barrels per day less than in 2022 because refinery upgrades allowed more heavy crude oil to be refined locally.
Currently, ADCOP carries 1.5 million barrels, over one-half of the UAE's daily crude oil exports. Over time, capacity will be boosted so that ADCOP will carry 1.8 million barrels, accounting for nearly three-quarters of the UAE's daily crude exports and 10 percent of oil that currently passes through the Strait of Hormuz.
The UAE's Abu Dhabi Crude Oil Pipeline runs 400 km from onshore oil facilities at Habshan to Fujairah. The original nameplate capacity of the line is 1.5 million barrels per day with a reported current capacity close to 1.8 million barrels per day. The UAE exports around 1.1 million barrels per day of domestic crude via this route, leaving room for up to 700,000 barrels per day.
The problem: 700,000 barrels of spare capacity against a daily disruption of 20 million barrels is a drop in the ocean.
Bypass Capacity Across the Gulf: Severely Inadequate
The UAE isn't the only country with backup routes. Saudi Arabia operates the East-West crude oil pipeline, running from the Abqaiq oil processing center near the Persian Gulf all the way to the Yanbu port on the Red Sea.
Saudi Aramco operates the 5 million-barrel-per-day East-West crude oil pipeline, which runs from the Abqaiq oil processing center near the Persian Gulf to the Yanbu port on the Red Sea. Aramco temporarily expanded the pipeline's capacity to 7.0 million barrels per day in 2019 when it converted some natural gas liquids pipelines to accept crude oil. In 2024, Saudi Arabia pumped more crude oil through the East-West pipeline to avoid the shipping disruptions around the Bab al-Mandeb.
The US Energy Information Administration said about 2.6 million barrels per day of unused capacity from existing UAE and Saudi pipelines could be available to bypass the Strait of Hormuz. In total, the combined alternative pipeline capacity across all Gulf producers totals approximately 6.5-7 million barrels per day, representing only 35% of normal Hormuz throughput.
OPEC Plus retains approximately 3.5 million barrels per day of spare capacity, concentrated in Saudi Arabia and the UAE. However, a significant portion of this capacity cannot reach global markets if the Strait remains inaccessible. Alternative pipeline routes exist but cannot fully offset a Strait closure.
How High Could Oil Prices Go? Analysts' Worst-Case Scenarios
Markets have already started pricing in the risk. Analysts warn that a prolonged Strait of Hormuz disruption could push oil prices into triple digits. Markets are likely to price in an immediate-risk premium. The duration of the conflict would determine the severity of any spike.
Saul Kavonic, head of energy research at MST Marquee, said that should Iran succeed in closing the Strait, the implications for the global oil markets could be severe. This could present a scenario three times the severity of the Arab oil embargo and Iranian revolution in the 1970s, and drive oil prices into the triple digits, while LNG prices retest the record highs of 2022.
Under a full closure scenario, oil prices would likely spike to $120–150 per barrel within days, with sustained disruption pushing prices toward $180–200 per barrel — levels not seen in inflation-adjusted terms since the 1979 crisis.
Ali Vaez, director of the Iran project at the International Crisis Group, told Al Jazeera that closure of the Strait of Hormuz would disrupt roughly a fifth of globally traded oil overnight — and prices wouldn't just spike, they would gap violently upward on fear alone. The shock would reverberate far beyond energy markets, tightening financial conditions, fuelling inflation, and pushing fragile economies closer to recession in a matter of weeks.
Direct Attacks on the UAE: Jebel Ali Port and Airport Shutdowns
The disruption at the Strait of Hormuz is only part of the challenge facing the UAE. Iran's retaliatory strikes hit the UAE's critical infrastructure directly.
Iranian forces closed the Strait of Hormuz, and major aviation hubs in the UAE went offline following US-Israeli military attacks against Tehran. This blockade removes 20 million barrels of oil per day from global markets, threatening the energy security of major Asian and European economies. A 20% reduction in global liquefied natural gas supplies heightens the likelihood of industrial stagnation and internal energy deficits.
Aviation activity in the region supports global passenger and cargo movements through high-capacity hubs. Dubai International Airport handled 95.2 million passengers in 2025, serving as a critical connection point for 108 international airlines and 291 destinations. The closure of Gulf Cooperation Council infrastructure, resulting from Iranian retaliatory strikes, is indefinite and has interrupted the transit of valuable commodities and personnel.
Jebel Ali Port is the largest container port in the Middle East and one of the top 10 globally. Its shutdown affects not just oil transport but disrupts supply chains across the entire region.
How Big Is the Economic Impact? Inflation and Recession Risks
The IMF estimates that a 10% increase in oil prices adds approximately 0.3–0.4 percentage points to global headline inflation within 12 months. Under a sustained closure scenario driving oil to $175 per barrel — a 130% increase from current levels — the mechanical inflation impact would range from 3.9 to 5.2 percentage points globally.
A closure lasting more than 30 days would push global recession probability above 75%. GDP contractions of 1.5–3.0% are modeled for major importing economies under a three-month closure scenario.
The removal of 20 million barrels of daily supply triggers an immediate surge in Brent crude prices. If the blockade continues past the initial 72 hours, markets expect that prices per barrel will exceed $100. Higher energy costs will increase the price of refined fuels, affecting the transportation and logistics sectors globally.
China faces a significant threat to its manufacturing sector. The Strait of Hormuz transports approximately 50% of China's oil imports.
Conclusion: No One Is Prepared for a Disruption of This Scale
The effective closure of the Strait of Hormuz has exposed a core vulnerability in the global economy: 20% of the world's oil supply passes through a 21-mile-wide waterway, and backup routes can only cover a third of that volume.
The UAE's Fujairah pipeline and Saudi Arabia's East-West pipeline are well-thought-out contingency plans. But when 20 million barrels per day are disrupted, 2.6 million barrels of bypass capacity simply isn't enough. Oil prices have already climbed from $72 to $80, and if the blockade lasts more than a week, analysts project prices could hit $120 or higher.
The bigger problem lies in the cascading effects. Insurance premiums have surged to the point where shipping becomes economically unviable, aviation hubs have shut down cutting global connectivity, and supply chain disruptions ripple across industries. This isn't just an energy crisis — it's a systemic economic shock.
If this conflict extends beyond 30 days, the probability of a global recession rises above 75%. No single country or region can absorb a disruption of this magnitude alone.
