Strait of Hormuz Shutdown Sends Energy Prices Surging

(MENAFN) Iran's shutdown of the Strait of Hormuz in response to joint American and Israeli military strikes has sent shockwaves through global energy markets, raising alarm over accelerating inflation and deepening geopolitical instability.

Ebrahim Jabbari, a senior adviser to the commander-in-chief of Iran's Revolutionary Guard Corps (IRGC), declared the strait closed to all maritime traffic on Monday amid the ongoing offensive, warning that any vessel attempting to cross the waterway would be targeted.

Global energy markets responded instantly and sharply.

Brent crude surged past $79 per barrel — its highest point since January 2025 — while QatarEnergy, the Qatari state energy giant, announced a full suspension of liquefied natural gas (LNG) production after Iranian strikes disabled two of its key facilities.

European gas prices mirrored the chaos. April futures contracts on the TTF — the Dutch virtual trading hub that serves as Europe's most liquid natural gas benchmark — closed at €43.3 ($50.42) per megawatt-hour at 1700 GMT Monday, representing a staggering 35.5% spike compared to the market's last close on Feb. 27.

The fallout extended beyond energy markets into global maritime insurance. Major underwriters including NorthStandard, the London P&I Club, Gard, Skuld, and American Club all issued cancellation notices, citing elevated war risks across Iran and the Persian Gulf.

Tamer Kiran, chair of IMEAK Chamber of Shipping, told media that the economic consequences of the closure would be far-reaching. He described a short-term spike in freight rates alongside a more troubling medium-term trajectory of contracting global trade volumes and broad economic deceleration. He emphasized that the strait is irreplaceable in practical terms — channeling 21 million barrels of oil and derivatives daily, with roughly 85% of that volume bound for Asian markets. Any sustained disruption, he noted, would drive up energy costs, freight charges, and insurance premiums simultaneously.

Alternative overland pipeline routes through Saudi Arabia, the UAE, and Türkiye exist, Kiran acknowledged, but their combined capacity falls approximately 10 million barrels short of matching the strait's daily throughput.

"International commercial actors are strengthening their contracts with war risk clauses and diversifying their routes and supplies," he said. "Insurers are repricing premiums and tightening coverage conditions."

"From the perspective of governments, it's key to maintain maritime safety, coordinate the usage of strategic reserves, and invest in alternative energy corridors," he said, adding that any Turkish vessels in the region or Turkish shipowners planning voyages should urgently reroute.

On the legal dimension, Yucel Acer, a professor of international and maritime law at Ankara Yildirim Beyazit University, told media that international law firmly protects freedom of navigation through strategic waterways such as Hormuz.

"The strait's waters are divided among Iran, Oman, and the UAE; however, regardless of the status of ownership, all vessels retain the right of innocent passage without prior permission, except for foreign warships, as Iran requires a notification from such vessels," he said.

Acer clarified that while a coastal state may restrict certain cargo vessels deemed dangerous during wartime, that power has limits — Iran can only lawfully enforce a blockade within the specific portion of the strait falling under its own territorial waters.

Any move to seal off the strait's full width, he said, would constitute an unambiguous breach of international maritime law. While civilian vessels are legally protected, Acer cautioned that military presence and the credible threat of force are already sufficient to deter commercial shipping — making legal guarantees, in practice, secondary to physical risk on the water.

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