# Oil and the Strait of Hormuz

Back to [[2026-03-02-check-other-funds|overview]] | Related: [[2026-03-02-check-other-funds/timeline]], [[2026-03-02-check-other-funds/fed-and-rates]]

This is the single most important variable in the entire crisis. Everything else —
[[2026-03-02-check-other-funds/equities]], [[2026-03-02-check-other-funds/gold-and-safe-havens|gold]], [[2026-03-02-check-other-funds/fed-and-rates|rates]] — flows from what
happens here.

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## Why Hormuz Matters

The Strait of Hormuz is a narrow waterway between Iran and Oman. It carries:
- approx. 20 million barrels of oil per day
- approx. 20% of globally traded oil
- approx. $500 billion in annual energy trade
- China, India, Japan, and South Korea depend on it for 69% of their crude

There is no alternative route for most of this oil. When Hormuz closes, the oil doesn't
go somewhere else — it just stops.

## Current Status (March 2)

**Not formally closed.** Iran's General Rezaei said it's open "until further notice."
But operationally, it is shut:

- Zero traceable crude tanker passages since Saturday night
- approx. 150 tankers anchored in open Gulf waters, unable to transit
- approx. 170 containerships (450,000 TEU capacity) trapped inside the Gulf
- Iranian IRGC transmitting to vessels: "no ship is allowed to pass"
- Three tankers struck by missiles/drones in the first 36 hours
- Hapag-Lloyd suspended all transits. Other carriers following.
- Kuwait's port of Shuaiba suspended, evacuating vessels

**The insurance kill switch:** Even if Hormuz is technically "open," insurers are pulling
coverage. War risk premiums doubling. Lloyd's Market Association expected to update
Listed Areas designation. Without insurance, ships cannot sail — regardless of what Iran
says. Insurance is doing what Iran's navy doesn't need to.

## Oil Price Movement

| Time | Brent | WTI | Trigger |
|------|-------|-----|---------|
| Feb 28 pre-strike | approx. $67 | approx. $64 | Baseline |
| Feb 28 close | $72.87 (+9%) | $67 (+5%) | Strikes begin |
| Mar 1 Sunday futures | approx. $79 (+8%) | approx. $72 (+8%) | Iran retaliates, Hormuz shuts |
| Mar 2 early trading | $79.41 (+9% from Fri) | approx. $73 | Asia opens, insurance pulls |

**Forecasts if this continues:**
- Goldman Sachs: Brent could breach $100 if strikes expand
- Barclays: $100/bbl likely
- UBS: Material disruption could send Brent above $120
- Every $10/bbl adds 0.3–0.4 percentage points to US inflation

## OPEC+ Response

Emergency meeting on March 1. Agreed to raise output by 206,000 bpd for April. But:
- This is tiny vs. 20M bpd flowing through Hormuz
- Options discussed ranged from 137K to 548K — they chose conservative
- Saudi and UAE have spare capacity but *can't export it* with Gulf navigation disrupted
- OPEC+ statement didn't even mention the war — cited "healthy market fundamentals"

**Translation:** OPEC+ is not going to save this. The supply gap is physical, not
political.

## What Happens at $100 Oil

If Brent crosses $100:
- Goldman Sachs warns recession probability spikes
- US inflation could hit 4.5-6% (see [[2026-03-02-check-other-funds/fed-and-rates]])
- Consumer spending contracts — every $10/bbl costs the average US household approx. $300/year
- Airlines, shipping, manufacturing all face margin compression
- Emerging markets that import oil (India, Turkey, South Korea) face currency crises
- Fed is trapped between fighting inflation and supporting growth

## What to Watch

1. **First tanker through Hormuz** — this is the signal. When a major tanker makes the
   transit with insurance, the crisis is easing.
2. **Lloyd's Listed Areas update** — if Hormuz is formally listed, insurance costs
   become structural, not temporary.
3. **Brent at $100** — the threshold where this becomes a global recession trigger.
4. **OPEC+ emergency session** — if they call another meeting, the 206K wasn't enough.