As missile exchanges between Israel and Iran stretch into a fourth day, global markets are bracing for the worst-case scenario: Iran closing the Strait of Hormuz. The narrow waterway is one of the world’s most critical energy chokepoints—and its closure could unleash a cascade of economic and military consequences.
Just how likely is the Islamic Republic to close the strait? Well, prediction markets like Polymarket forecast a 21% chance of it closing before July and a 34% that it closes by the end of the year. Yikes!
Here are 10 things that could happen if the oil lifeline does in fact shut down.
1. Global Oil Prices Could Explode
The Strait handles about 20% of all global oil—more than 17 million barrels per day. If Iran halts traffic, crude prices could skyrocket. Analysts warn that Brent could spike above $150 a barrel, fueling panic buying and a global energy crunch.
2. Inflation Could Surge Worldwide
Oil is embedded in everything—from transport to food. A major disruption would raise gas prices, shipping costs, and even grocery bills. Economists estimate that every $10 increase in oil adds 0.3–0.5 percentage points to inflation in import-heavy countries.
For what it’s worth: The CFTC-regulated prediction market platform Kalshi says there’s a 34 percent chance that inflation reaches at least 4%, and a 5 percent chance that it soars above 8% this year.
3. Asian Economies Would Be Hit First
China, India, Japan, and South Korea rely heavily on Gulf oil that travels through the Strait. China alone gets nearly 40% of its seaborne crude from this route. A closure would send energy costs soaring across Asia, putting currencies and trade balances under stress.
4. Military Conflict Could Escalate
The U.S. Navy’s Fifth Fleet is stationed nearby—and any attempt to block the Strait could spark immediate military retaliation. Experts warn that a naval showdown could draw in Saudi Arabia, the UAE, and possibly NATO allies, leading to a broader regional war.
Again, back to prediction markets: There’s a 33% chance of the U.S. using military action against Iran this month, and 50% chance that happening before August.
5. Tankers Could Stop Moving
The Strait narrows to just 21 miles, with only 2-mile-wide shipping lanes in each direction. Insurance for vessels would spike or be pulled entirely. Even a brief shutdown would trap dozens of oil tankers and halt millions of barrels in transit.
6. Strategic Oil Reserves Might Be Deployed
The U.S., Japan, and other nations would likely tap their strategic petroleum reserves to stabilize supply. But that would only be a short-term fix—and wouldn’t solve the bigger problem of a blocked route and frozen shipping activity.
7. Financial Markets Would Whiplash
Stock markets would likely plunge on recession fears, while oil and energy stocks surge. Investors would flee to safe havens like gold, the U.S. dollar, and Treasuries. Volatility would dominate global trading floors.
8. Global Trade Disruption
Beyond oil, the Strait also carries liquefied natural gas (LNG) and other commercial goods. A closure could jam up global supply chains already strained from recent geopolitical shocks. Expect port delays, price hikes, and renewed shipping chaos.
9. Political Fallout Around the World
Governments across Europe, Asia, and Africa would face public backlash from rising energy prices. Developing economies might struggle to secure alternative supplies, raising the risk of social unrest, blackouts, and rationing.
10. Long-Term Energy Rethink
If the Strait closes—even temporarily—it could accelerate global moves toward energy diversification. More countries may pursue nuclear, renewables, or domestic fossil fuel development to avoid future reliance on a volatile region.
