WSJ: Hormuz Strait blockade is the "largest oil crisis in history" with daily production evaporating by 9 million barrels, and energy shortages impacting the global economy

One week into the US-Iran conflict, the Strait of Hormuz is nearly fully blocked, forcing Iraq to cut production by over two-thirds. Abu Dhabi National Oil Company (ADNOC) has followed suit with production cuts, causing US oil prices to surge past $100 per barrel. The Wall Street Journal reports this is the most severe energy supply shock since the 1970s. If the blockade continues until the end of the month, daily production in the Persian Gulf could drop by nearly 9 million barrels—almost 10% of global demand.
(Background: After oil prices soared 9%, Trump intervened! Navy escort in Hormuz + DFC war risks, BTC rebounded above $71,000)
(Additional context: If ships can’t pass through Hormuz, is there no alternative? Are there other options?)

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• Storage tanks nearing capacity, oil-producing countries forced to shut down one by one
• Aluminum and fertilizer supplies in crisis: “Largest supply disruption in history”
• US has buffers, but Euraasia may bear the brunt

Just one week after Trump’s Iran conflict began, a disaster some analysts say is “impossible” is unfolding. The Strait of Hormuz—through which about 20% of the world’s oil and liquefied natural gas pass, narrowest at only 21 miles—has seen tanker traffic plummet to nearly zero. The problem isn’t just soaring oil prices; oil storage facilities in the region are physically filling up, forcing the shutdown of oil wells one after another.

On February 28, the day the US-Israel coalition bombed Iran, Norwegian energy company DNO’s chairman Bijan Mossavar-Rahmani was flying from New York to Oslo. On the plane, he ordered all of the company’s oil wells in Iraq to be shut down—these are among the first fields to be halted in this war. Almost simultaneously, a recording allegedly of an Iranian naval officer warning ships not to enter the strait circulated wildly in energy industry WhatsApp groups.

Storage tanks nearing capacity, oil-producing countries forced to shut down one by one

Tankers cannot pass through the strait, but oil wells cannot stop operating overnight. The immediate consequences are clear: Iraq’s storage facilities are filling up first, forcing the OPEC second-largest producer to cut output by over 70%. Kuwait is following closely, with onshore tanks also nearing capacity.

On Saturday, ADNOC signaled it is slowing production to prevent overflow. Morgan Stanley analyst Natasha Kaneva told The Wall Street Journal:

“In the entire recorded history of the strait, it has never been closed before. For me, this isn’t just the worst-case scenario—it’s an unimaginable one.”

Kaneva estimates that if the strait remains closed through this Friday, daily production in the Persian Gulf could decrease by more than 4 million barrels; if the blockade persists until the end of March, the reduction could reach about 9 million barrels—nearly 10% of global demand.

Aluminum and fertilizer supplies in crisis: “Largest supply disruption in history”

The impact extends far beyond oil. Large quantities of fertilizer also rely on transportation through Hormuz to supply agriculture worldwide. Aluminum prices have soared to multi-year highs, with Middle Eastern aluminum smelters declaring force majeure— a legal clause excusing suppliers from delivery obligations due to unforeseen events. Norsk Hydro has already cut capacity in Qatar and warns that full recovery could take six to twelve months.

Energy historian Daniel Yergin, in a WSJ report, states:

“What we are witnessing is the largest supply disruption in world history measured by daily output. If it lasts for weeks, it will reverberate throughout the global economy.”

US oil prices broke $100 per barrel on Sunday for the first time since the Russia-Ukraine war began. Most ships leaving the strait are carrying Iranian oil. Traders warn that if the strait cannot reopen within days—whether through US naval escort or shipowners’ risk assessments—the crude market could surge further.

US has buffers, but Euraasia may bear the brunt

US Energy Secretary Chris Wright said on Fox News Sunday, “Energy will soon flow through the Strait of Hormuz.” He attributed the price increase to “fear of a long-term crisis— but the reality is not so.”

Compared to the 1970s, the US has more buffers: oil’s share of GDP has greatly decreased, and the US is now a top energy exporter. However, Europe and Asia face very different situations. Decades of US military and allied efforts have ensured the passage remains open, but now the blockade threatens to transmit shocks to gasoline and diesel prices, mortgage rates, and borrowing costs for governments.

For Trump, this energy crisis threatens his economic agenda. But for highly dependent economies in Euraasia, it may just be the beginning of a long-lasting impact.