U.S.-Iran Conflict Disrupts Strait of Hormuz Shipping, Pushing Oil Prices Above $120 Per Barrel

-Iran conflict. The channel's double-blockade has supercharged global energy prices, with oil reaching toward $120 a barrel during the initial weeks. The Middle East conflict has largely halted shipping via the Strait of Hormuz, impacting the trade of a wide range of energy products, according to the International Energy Agency.

The Strait of Hormuz is located between southern Iran and Oman's Musandam Peninsula, serving as a vital waterway through which around 20% of the world's oil was shipped before the war. Roughly 20 million barrels of oil and petroleum products transited through the Strait of Hormuz every day prior to the closure.

-Iran conflict involves stop-start peace talks, with both sides using the strait as a bargaining chip. Iran controlled access in and out of the Strait of Hormuz for several weeks as oil prices rocketed toward $120 a barrel. S.

Naval blockade of Iranian ports began in mid-April. IEA Executive Director Fatih Birol told CNBC on Thursday that the $110 trillion global economy can be taken hostage by a couple of hundred men with guns across a 50-kilometer stretch of strait. Birol also told CNBC on Thursday that countries should make alternative routes and alternative options for energy supply.

Birol told CNBC years before the current crisis that countries should diversify energy supply routes. Maisoon Kafafy, senior adviser to the Atlantic Council's Middle East programs, told CNBC that risks around the Strait of Hormuz were well understood for years.

Kafafy told CNBC that until the February 2026 closure, the costs did not reach the threshold that would justify the scale of investment alternative infrastructure requires.

Lucila Bonilla, lead emerging markets economist at Oxford Economics, told CNBC on Tuesday that the war has accelerated investments in bypass routes. Bonilla told CNBC that Tehran's strategy to block the Strait of Hormuz appeared to pay off in the early days of the war. S.

Naval blockade of Iranian ports has neutralized Iran's strategic advantage. Saudi Arabia and the United Arab Emirates have some oil export routes that do not transit the Strait of Hormuz. Iran, Iraq, Kuwait, Qatar, and Bahrain rely on the Strait of Hormuz to deliver the vast majority of their oil exports, according to the International Energy Agency.

Most exports via the Strait of Hormuz are destined for Asia, with China, India, and Japan being the main importers, the agency states. Iran has attacked energy infrastructure of Gulf neighbors and fellow OPEC producers with missiles and drones.

Gulf states told CNBC that Iran's behavior has created a huge trust gap. Saudi Arabia has the East-West pipeline linking processing facilities near the Persian Gulf to an export hub on the Red Sea. The UAE has the Habshan–Fujairah (or ADCOP) pipeline to the port of Fujairah.

5 million barrels per day of available capacity, according to the International Energy Agency. Saudi Arabia said in March its East-West pipeline is pumping 7 million barrels per day.