The Roundup – March 2026
Strait of Hormuz Closed for Business
On the 28th February, war broke out in the Middle East, as the US and Israel carried out strikes on Iran. In response Iran launched attacks on Israel and regional US-allies, as well as shipping vessels in the Strait of Hormuz, effectively closing the shipping channel responsible for transporting approximately 20% of the world’s oil and LNG supply.
The increased risk of transit through the shipping corridor has resulted in a significant reduction in global oil supply, particularly given the limited alternate transport options available in the Gulf. Oil prices surged to mid-2022 levels. Strikes on energy and military infrastructure from both sides intensified the conflict further, which also impacted prices.
The blockage of the Strait saw storage facilities reach maximum capacity early in March, and key OPEC nations such as Saudia Arabia, Iraq, United Arab Emirates, and Kuwait, systematically reduced their level of production. However, the nature of oil production means that reverting to previous output quantities will not be a quick process.
The initial stages of the conflict saw energy infrastructure spared, however escalation of the fighting saw multiple sites in the region targeted, increasing the disruption to energy markets. Some of the more intense strikes, such as the Qatari Ras Laffan industrial complex, resulted in extensive damage and are estimated to take 3 – 5 years to fully repair.
The disruption of stability in the region and the potential of continuation and escalation of the war, combined with soaring energy prices and the risk of reigniting inflation, saw market volatility rise significantly over the month. Each development was accompanied by a swift reaction from investors, causing markets to whipsaw over the month.
Sharemarkets lifted on news of a potential resolution to the conflict and oil prices eased given the possibility of the Strait of Hormuz being reopened. In contrast, intensification between the two sides resulted in sharemarkets selling off, while energy prices accelerated on the notion of a prolonged disruption and its compounding effects for the world economy.
Safe-haven assets experienced some of the same undulations, as the increase in rhetoric saw investors move away from riskier assets. The US dollar rallied, while currencies of net-energy importing countries generally eased. The lift in uncertainty drove a steady flow of funds into short-term cash assets, as investors looked for safety.
In efforts to help stabilise oil markets and boost supply, sanctions on both Russian and Iranian oil already at sea, were temporarily relaxed, and the International Energy Agency authorised the release of 400 million barrels from Strategic Oil Reserves to help address the shock. However, experts believe these will be ineffective given the scale of the disruption.
The closure of the Hormuz conduit is estimated to cut around 18.4 million barrels/day of global oil flows, while offsets like alternate distribution routes, stockpile releases and relaxing sanctions ease this to a shortfall of around 11.1 m b/d it remains a supply squeeze that is akin to the combined oil consumption of the UK, France, Germany, Spain and Italy.
There remains a high level of uncertainty around the duration and magnitude of the events in the Middle East, and the subsequent impact on the Strait of Hormuz. However, what’s clear is that the longer oil supply remains constrained, the bigger it’s impact. A sustained closure of the shipping route would threaten a global recession and risk reigniting inflation.
For a global economy still recovering from several previous successive shocks (supply chain disruption, decades-high inflation, an energy shock following Russia’s invasion of Ukraine, and substantial increases to US tariffs) this has seen the OECD forecast global GDP of 2.9% for 2026 downfrom 3.2% in 2025, citing the increased downside risks to the world economy.