Strait of Hormuz War Chokes Gulf Oil Flows, Roiling Energy and Food Commodity Costs

Escalating conflict around the Strait of Hormuz has severely disrupted oil and product flows from the Persian Gulf, pushing Brent crude toward recent highs near $120 per barrel and driving exceptional volatility in freight and energy benchmarks. For commodity users in India and across Asia, constrained access to Gulf crude, LPG and petrochemicals is lifting input and transport costs, with second‑round effects building across food, feed and fertilizer supply chains.

Iran’s Revolutionary Guard has effectively imposed a de facto “toll booth” regime in the Strait, leading to a collapse in tanker transits and prompting major trading houses and shipowners to suspend or reroute shipments. At the same time, targeted strikes on export terminals, refineries and energy infrastructure in Iran and Saudi Arabia have compounded the logistics shock, reinforcing a risk premium across global commodity markets.

Introduction

The latest phase of the US–Iran war and associated regional strikes has turned the Strait of Hormuz into a high‑risk conflict zone since late February 2026. Iran’s threats against commercial vessels and attacks on tankers have led to an effective halt in normal shipping through the corridor, which normally handles around one‑fifth of global seaborne oil trade.

In parallel, missile and drone attacks have hit key energy assets including Kharg Island export facilities, South Pars gas and condensate infrastructure, and a Saudi Aramco refinery at Ras Tanura, forcing production shut‑ins and temporary outages. Brent crude has traded in a wide range between roughly $100 and near $120 per barrel over the past week as markets weigh sustained Gulf export constraints against intermittent signals of potential de‑escalation.

🌍 Immediate Market Impact

The near‑closure of Hormuz has sharply reduced tanker movements, with some estimates pointing to traffic down by around 70–90% since early March, severely curbing crude and product loadings from Iran and other Gulf producers. War‑risk premiums, insurance costs and daily charter rates for very large crude carriers (VLCCs) on Middle East–Asia routes have jumped to record levels above $400,000 per day, materially inflating delivered crude costs into Asian refining hubs.

Higher flat prices and freight have quickly filtered into refined fuel markets. US and European gasoline and diesel benchmarks have risen, while Asian gasoil cracks have strengthened as regional buyers seek non‑Gulf barrels. Combined with a stronger US dollar and tighter credit conditions, this dynamic is raising landed energy and logistics costs for food and agri‑commodity importers across South Asia.

📦 Supply Chain Disruptions

Port and terminal operations across the northern Gulf are under strain. Attacks on Iranian export hubs such as Kharg Island, along with repeated strikes on tankers and facilities near key Omani and Saudi ports, have prompted long delays, diversions and precautionary shutdowns. Many owners are avoiding the Strait entirely, forcing Gulf producers to use alternative loading points where possible or to curtail output.

Saudi Arabia and some Gulf exporters are increasingly shifting crude and products toward Red Sea terminals to bypass Hormuz, lengthening voyage times to Asia and Europe. For Indian and broader South Asian buyers, this is tightening prompt cargo availability, extending shipping lead times and raising freight spreads relative to Atlantic Basin and African grades, complicating procurement and inventory planning for refiners and downstream industries.

📊 Commodities Potentially Affected

• Crude Oil: Directly impacted by reduced Gulf export flows and elevated transit risk through Hormuz, supporting higher flat prices and backwardation in Brent and Dubai benchmarks.
• Refined Fuels (Diesel, Gasoline, Jet): Tightness in Middle East supply and higher freight rates are lifting regional refined product prices, increasing logistics and processing costs for food, retail and cold‑chain sectors in India and Asia.
• LPG and Petrochemical Feedstocks: Disruption at Gulf export terminals and shipping lanes is restricting availability of LPG and NGLs crucial for cooking fuel and plastics, with price spikes likely to feed into packaging and household energy costs.
• Fertilizers (Ammonia, Urea, Phosphates): Elevated gas and oil prices increase nitrogen and phosphate production costs globally, while shipping risks in the Gulf complicate exports from regional producers supplying South Asia.
• Grains and Oilseeds (Indirect): Higher bunker and road fuel costs are lifting freight and inland logistics rates, potentially widening import parity prices for wheat, maize, soymeal and vegetable oils into India.

🌎 Regional Trade Implications

For India and neighboring South Asian importers, the immediate impact is a more expensive and less predictable energy import slate. Buyers are stepping up sourcing from West Africa, the US Gulf Coast, Latin America and Russia, but longer haul routes and constrained tanker capacity are raising CIF costs and delivery risk.

Gulf producers with Red Sea outlets, as well as non‑Gulf exporters in the Atlantic Basin, may capture greater market share in Asia so long as Hormuz remains effectively blocked. Conversely, Iranian exports are heavily constrained, and some Gulf ports in Oman and the UAE face recurring operational disruptions due to nearby strikes, limiting their ability to act as stable transshipment hubs.

🧭 Market Outlook

In the near term, crude and product markets are likely to remain highly headline‑driven, with price direction tied to any credible ceasefire framework, signals on reopening Hormuz, or further strikes on energy infrastructure. Analysts note that Brent’s recent spike toward $120 per barrel reflects a market pricing in weeks, if not months, of constrained Gulf flows, but not yet a full‑scale, long‑duration blockade.

For agricultural and food‑industry participants in India, the key variables will be diesel and LPG price pass‑through, bunker surcharges on bulk carriers, and any tightening in fertilizer availability and pricing ahead of key planting seasons. Volatility in freight and fuel hedging markets is likely to stay elevated, arguing for more active risk management and flexible supplier portfolios.

CMB Market Insight

The current Hormuz crisis is primarily an energy shock, but its ripple effects are already reshaping cost structures across global food, feed and fertilizer value chains. For import‑dependent markets such as India, sustained disruption risks higher landed prices, wider basis volatility and more complex logistics planning for core staples and inputs.

Strategically, commodity buyers should treat this as a structural chokepoint risk rather than a one‑off event: diversifying origin mixes, locking in critical fuel and freight exposure where feasible, and stress‑testing supply chains against prolonged Gulf transit constraints. Until a durable maritime security and political settlement emerges, elevated energy‑linked costs will remain a central feature of the agricultural commodity landscape.