Hormuz chokepoint: War, blockade, and the unraveling of global energy flows

The blockade at Hormuz has throttled global energy flows, driving price shocks and exposing deep fractures from the Persian Gulf to Europe and Asia.

Suleyman Karan

 

The Cradle 

Global energy markets are struggling to absorb the shock of war in West Asia. The disruption of nearly 20 million barrels per day (bpd) of crude oil and petroleum product exports, combined with the limited capacity to bypass the Strait of Hormuz, has placed both producers and import-dependent economies under strain. 

The issue extends beyond broken supply chains. Price escalation across crude and petrochemical markets has already begun to ripple outward.

Since the US-Israeli war on Iran that started on 28 February, crude prices have surged from roughly $70 per barrel to around $120 by the end of April, with refined products rising even faster amid tightening supply and logistical strain.

Fuel markets under strain

The closure of Hormuz has forced export-oriented refineries to scale back operations or halt production entirely as storage capacity fills. More than 4 million bpd of refining capacity is now at risk. While production elsewhere can theoretically compensate, transport and supply constraints limit how far that adjustment can go.

The most immediate pressure has emerged in diesel and jet fuel. What began as warnings from the International Energy Agency (IAE) has materialized into concrete disruptions. The German airline Lufthansa has already announced the cancellation of 20,000 flights due to fuel shortages, while the Dutch airline Transavia has followed with cuts to its schedule through May and June. IATA data shows jet fuel prices in Europe have risen by over 105 percent year-on-year.

Declining supplies of liquefied petroleum gas (LPG) and naphtha have forced petrochemical producers to scale back polymer output, compounding losses across the sector. Consumer countries have leaned on existing reserves to soften the blow. Global stockpiles of crude and refined products stand at around 8.2 billion barrels, roughly half held by Organisation for Economic Co-operation and Development (OECD) states.

IEA members agreed in March to release 400 million barrels from emergency reserves, but such measures can only delay deeper disruptions. They do not resolve the structural damage unfolding across production and distribution networks.

Structural damage and limited relief

The scale of damage to energy infrastructure across the Persian Gulf is significant. Fatih Birol, executive director of the IAE, has warned that energy output lost in the conflict could take around two years to recover. Shipments tied to pre-war contracts continue, but new tanker loadings stalled in March, cutting off flows to Asia.

Oil-producing states along the Gulf are absorbing the heaviest impact. Facilities have been hit, output reduced, and losses mount with each passing day. A full damage assessment remains out of reach, though projections suggest recovery will take several years.

Saudi Arabia’s production capacity has suffered measurable damage. Qatar has lost close to one-fifth of its liquefied natural gas (LNG) output, a gap that will not be quickly repaired. Across the region, an estimated 2.4 million bpd of refining capacity is offline. Around 10 percent of global crude production remains disrupted, a deficit that cannot be offset while Hormuz stays closed.

Even under favorable conditions, a ceasefire and reopening of the strait would not bring immediate normalization. Markets would require at least six months to stabilize.

Constrained alternatives

Saudi Arabia has also confirmed a reduction of 600,000 bpd in production capacity and a 700,000 barrel decline in flows through its East–West Pipeline. This route, linking Gulf fields to the Red Sea, has been central to maintaining exports. Damage to a pumping station shortly after the ceasefire announcement underscored its vulnerability.

Additional strikes on the Manifa and Hurays fields have cut output by around 300,000 bpd. Overall, Saudi production capacity has fallen by at least five percent. Even if Hormuz reopens, the kingdom will struggle to fully compensate for lost volumes.

Qatar’s position as a key LNG supplier has also been compromised. Following strikes linked to the wider conflict, the Ras Laffan industrial complex sustained damage that will take years to repair. QatarEnergy estimates that around 17 percent of LNG export capacity has been affected, with restoration timelines ranging from three to five years.

The impact extends further. A gas-to-liquids facility operated jointly with Shell has also been hit, reducing capacity for at least a year. Annual losses of around 12.8 million tonnes of LNG are now expected.

Fractures within OPEC and regional fallout 

The UAE’s decision to leave OPEC marks a significant shift within the energy bloc. Economic pressures and political tensions both appear to have shaped the move. Long-standing dissatisfaction with production quotas has converged with the economic strain imposed by the war.

The departure is likely to deepen friction with Saudi Arabia while raising broader questions about the cohesion of OPEC itself. It would not be an exaggeration to say that Dubai did not take this decision alone. It should be viewed as a new phase in plans by Washington and Tel Aviv to create a rupture in the Gulf and weaken OPEC’s cartel status. With the decision coming into effect today, the UAE ends its 58-year membership in the cartel. 

The conflict has also exposed vulnerabilities within the UAE’s own energy infrastructure. The Ruwais Refinery, with a capacity of 922,000 bpd, was among the earliest targets. Gas processing operations at Habshan were suspended multiple times, while explosions at offshore fields halted production.

Fujairah Port has allowed exports to continue outside Hormuz, but repeated attacks on storage and transport facilities have forced intermittent shutdowns. The extent of disruption would have been far greater without this alternative route.

A region’s energy lifelines under pressure

Kuwait’s Mina al-Ahmadi and Mina Abdullah refineries have sustained repeated strikes but remain operational. Before the war, both were significant suppliers of jet fuel to Europe and refined products to Asia. Disruptions to these flows have intensified supply concerns across both regions.

Iraq, OPEC’s second-largest oil producer, has been among the hardest hit due to its lack of alternative export routes. The effective closure of the strait forced the country to halt more than three-quarters of its production, reducing output from 4.3 million bpd to around 800,000.

Attacks on infrastructure, including the Rumaila field, have compounded the crisis. Iraq’s internal divisions further complicate the picture, with competing actors backed by regional powers. Even if the current conflict subsides, the country remains exposed to renewed instability. 

Iran has absorbed multiple strikes targeting fuel depots and energy facilities, including attacks on the South Pars Gas Field. While key export infrastructure at Kharg Island has largely avoided damage, several production units have been taken offline.

Despite economic pressure, the war has produced a degree of internal consolidation. The more difficult phase may come after hostilities end, when the country must attempt to stabilize both its economy and energy sector.

Oman has faced comparatively limited disruption and may emerge in a more stable position than its neighbors. Operations at Salalah Port have been affected, prompting Maersk to suspend activity, but the scale of damage remains contained.

Bahrain presents a different case, having declared force majeure on 9 March following an attack on the Sitra Refinery, effectively shutting operations. Damage is severe, and full recovery could take months. More pressing for Bahrain is domestic unrest, with tensions between the Sunni ruling minority and Shia majority raising fears of renewed uprising.

Global spillover and shifting balances

The impact of the conflict extends well beyond the Gulf. South Asia’s emerging economies and Japan have borne some of the highest costs, as anticipated. China appears better positioned, benefiting in part from its preparedness and the relative weakening of regional competitors.

Tensions in the Strait of Malacca add another layer of uncertainty, raising the possibility of further disruptions to global trade routes.

Europe is also set to absorb a significant share of the burden. Energy costs have already surged since the Russia–Ukraine war, and the current crisis affects both supply shortages and price pressures.

By contrast, energy-rich economies in the Americas are better insulated, while import-dependent states face mounting strain. Africa reflects a similar divide, with producers such as Algeria and Nigeria positioned to benefit, while others remain vulnerable.

Long-term uncertainty 

The damage triggered by the Hormuz crisis will take at least two years to address, and likely longer. Global growth forecasts for 2026 are already being revised downward. 

Even under relatively stable conditions, the economic cost will weigh heavily on Gulf producers, as well as on Asian and European economies. Slower growth in East and South Asia in particular carries wider implications for global demand. 

Crude prices are unlikely to return to pre-war levels near $70 in the near future. Transport, insurance, and freight costs will remain elevated, feeding into broader commodity inflation. Fragilities within the global financial system are expected to deepen as a result.

As a new balance begins to take shape, further tensions appear likely. The longer-term consequences may extend beyond energy markets, intersecting with climate pressures that continue to intensify in the background.

Pakistan-Iran corridor punches through the Hormuz blockade

By opening six overland routes for Tehran-bound cargo, Islamabad is turning transit trade into strategic leverage as US pressure reshapes the Persian Gulf’s commercial arteries 

F.M. Shakil

The Cradle 

When more than 3,000 Iran-bound containers began piling up at Karachi’s ports, the Strait of Hormuz crisis had already moved beyond the sea. It was now pressing on Pakistan’s docks, customs authorities, and border crossings. Soon after, Islamabad announced an overland transit mechanism for third-country cargo moving through Pakistan and into Iran.

This shift occurs as Washington’s influence over Persian Gulf and West Asian nations continues to decline, leading to new geostrategic adjustments throughout the region, affecting ports, pipelines, and defense diplomacy.

Energy security, military cooperation, and trade routes are being reassessed, while China and Russia quietly push alternatives that reduce US influence and open new regional linkages.

Analysts say the emerging pattern is visible in calls for a combined Muslim force, efforts by Gulf and Arab states to dilute dependence on Washington, and the growing push to replace the dollar in energy transactions. Each trend points to a region testing how far it can move beyond the old US-led order.

For Pakistan, the calculation is also domestic.

Transit trade promises customs revenue, port activity, and leverage at a time when Islamabad is squeezed by debt, energy costs, and security pressures along its western frontier. A corridor serving Iran can also support Pakistan’s ambition to become a connector between the Arabian Sea, Central Asia, and western China.

A land bridge for Iran

In line with these regional developments, Pakistan made a surprising and daring move last month by allowing Iran to carry its commercial shipments across six overland routes, ending at the Taftan border crossing with Iran.

Pakistan’s Ministry of Commerce issued the “Transit of Goods through Territory of Pakistan Order 2026” on 25 April, and three major seaports—Karachi Port, Port Qasim, and Gwadar Deep-Sea Port—were designated to receive and dispatch cargo to Iran and onward to Central Asian states.

Media reports framed the decision as a way for Iran to bypass the US blockade linked to the Strait of Hormuz, although Islamabad has avoided presenting it in openly confrontational terms.

Earlier last month, Pakistan sent a shipment of frozen beef to Uzbekistan via Iran, opening a new overland route through the Gabd-Rimdan border crossing between Iran and Pakistan. It was a test shipment, and officials said that the Iran corridor will facilitate trade between Iran and Central Asia via Pakistan's ports of Karachi and Gwadar.

Global media have suggested that the new arrangement could thwart US efforts to halt Iranian cargo shipments, a ploy primarily aimed at limiting Iranian oil exports, especially to China, and at tightening pressure on Tehran’s economy.

Speaking to The Cradle, Mushahid Hussain Syed, a former information minister and head of Pakistan's Senate Defense Committee, says:

“The unfair blockade has left thousands of Iranian containers stuck at Karachi ports, which has made it harder for people in Iran to get consumer goods. However, I disagree with the media reports suggesting that the overland corridors with Iran render the US blockade of Hormuz technically ineffective. The media intentionally or unintentionally made this facility seem like a way to help Iran get around the US blockade, even though it has a pure business consideration and has nothing to do with making things worse between the US and Tehran.”

Syed says that establishing six overland transit lines to Iran will have major political, economic, and diplomatic consequences. The corridor, he adds, has gained importance amid the US Navy’s blockade of the Strait of Hormuz since 13 April.

The immediate result of Pakistan’s new regulations is the potential clearance of about 3,000 Iranian containers stranded in Karachi, after restrictions on ships traveling to and from Iran left essential food and consumer goods stuck in the Pakistani port city.

Washington’s silent consent?

Did the US allow Pakistan to provide Iran with land routes around the Strait of Hormuz blockade? Has the blockade become less effective now that Iranian cargo can move through Pakistan?

These questions have circulated on social media since The Economic Times of India published the headline, “Asim Munir’s double game: Pakistan punches a legal hole in the US naval blockade of Hormuz,” on 27 April.

Some observers see the development as evidence that backchannel peace talks are producing results. In that reading, Washington has accepted a partial easing of pressure while expecting Iran to reopen the Strait, thereby lowering the likelihood of a wider escalation.

On 1 May, US President Donald Trump was asked by a reporter whether he knew Pakistan had opened land routes with Iran. He replied that he was aware of it, while expressing respect for Field Marshal Asim Munir and Prime Minister Shehbaz Sharif.

Majyd Aziz, President of the Employers Federation of Pakistan, tells The Cradle:

"Conventional wisdom and market intelligence suggest that China and Russia did play a role in this policy’s formulation. However, common sense indicates that the facility would not have been offered without tacit approval from Washington. The beneficial element is that despite UN economic sanctions, a constant smuggling system, and a 900-kilometer border, bilateral trade has the potential to become a normal conduit advantageous to both countries.”

Aziz explains that, in the case of China, the agreement would most likely enable China-Iran trade via the China-Pakistan Economic Corridor (CPEC) rather than through Central Asian countries. Russia, always seeking access to warm-water ports, would also view Pakistan’s geography as an opportunity to bypass US and European sanctions.

He argues:

“The juxtaposition of China, Russia, Iran, and Pakistan is ideal for streamlined transportation via land routes. Therefore, China could have played a facilitative role in convincing Pakistan that it would provide all diplomatic support, given its critical mass to withstand any negative reactions from the US or even Europe.”

Aziz adds that a key bottleneck to implementation remains the hesitation of Pakistani commercial banks to support transit trade with Iran due to US sanctions. Without letters of credit, insurance coverage, and banking channels, the corridor could remain a narrow emergency route rather than the broader trade artery its supporters envision.

From Jebel Ali to Gwadar

Iran has been uprooting its logistics infrastructure from the Persian Gulf to shift its maritime trade—mostly handled by the UAE—to Pakistan’s overland corridor.

The movement of a large amount of Iranian-linked cargo, worth tens of billions of dollars, from busy hubs in the UAE—particularly Dubai’s Jebel Ali Port—to ports like Gwadar, Karachi, and Port Qasim indicates a clear shift in the regional trade scene, driven by increasing geopolitical tensions.

Iran has depended on the UAE's re-export systems for a long time, managing about US$22 billion in imports in the year 2025. Total bilateral trade has increased to roughly US$27 billion.

However, due to significant security concerns, including the need to avoid potential sanctions and disruptions to sea routes, as well as the increasing instability in the region that could affect trade, this setup is gradually being shifted to overland routes.

In a series of posts on X, The Tehran Times, Iran’s leading international daily, said the country has replaced the UAE’s Jebel Ali port with Pakistani seaports.

The newspaper argued that replacing the UAE route with the Pakistani overland corridor could accelerate cargo movement, reduce costs, and bring Iran closer to the $60 billion CPEC network and the Belt and Road Initiative (BRI), positioning Pakistan as a bridge between South Asia and Eurasia amid a period of contested sea power.

“Setting up six overland routes, such as Gwadar and Taftan, is a smart move that will help both Iran and Pakistan. The main goal of this corridor is to resolve the problem of Iranian cargo that is stuck and to make it easier for goods from other countries to enter Iran through Pakistan,” Syed opines.

Temporary fix or permanent corridor?

How long will the Hormuz crisis persist? Could it still escalate into shortages of oil, gas, and other commodities, deepening global instability? In Pakistani trade circles, the question now is what happens to the land-route mechanism with Iran if the Strait reopens for regular shipping. Aziz reveals:

“The argument over these variables continues, as the Strait became a tinderbox, exacerbating the front-loading shipping costs. A suspension of hostilities, the opening of the Strait, and the resumption of oil, gas, and commodity cargo would eventually release pressure on the global economy. However, the six land-route facilities to Iran will remain intact and eventually become permanent, even if the war ends. This will not only generate considerable revenue, but hopefully, the much-delayed Iran-Pakistan Gas Pipeline will start functioning.”

He adds that the underlying issue remains Tel Aviv's confrontational approach, rooted in Israel's substantial and unwavering influence over Washington.

“Netanyahu would be uncomfortable with the US backing down and Iran consenting to a sensible compromise; therefore, the battle will continue in a blow-hot, blow-cold phase,” Aziz remarks.

Bahrain’s western wager sinks in Hormuz

Manama tied its security and economy to Washington, Tel Aviv, and Abu Dhabi. Now, the smallest GCC state is discovering how little protection that alignment offers when the Strait of Hormuz closes

Aidan J. Simardone

The Cradle 

A causeway, a small island, and a vanished oil route now define Bahrain’s crisis. Since Iran closed the Strait of Hormuz to hostile shipping, the economies of the Persian Gulf have been forced into emergency mode as energy exports stall and tourism dries up. 

Some Gulf states can lean on vast sovereign wealth funds. Others entered the war with balanced books and enough credit to borrow through the shock.

Bahrain has neither cushion. Even measured against its tiny population – the smallest in West Asia – its sovereign wealth fund is the weakest in the Gulf Cooperation Council (GCC). It is also one of the most indebted states in the world and required a bailout as recently as 2018, and depended on Saudi military intervention to crush the 2011 uprising.

Whether anyone will rescue Manama again – financially or militarily – is now an open question. For years, Bahrain has tied itself tightly to the west, becoming the second Arab state to normalize relations with Israel through the Abraham Accords. But as western hegemony recedes and even Saudi Arabia takes a more independent line, Bahrain may find itself increasingly alone.

Strained before the war

Even before the Strait of Hormuz closed, Bahrain was in trouble. Compared with other GCC countries, its oil reserves are small at 125 million barrels. Meanwhile, Qatar has a population three times larger and 25 billion barrels in oil reserves.

Despite this, oil accounts for 60 percent of the Bahraini government’s revenue.

The political strain predates the current war. During the 2011 Arab Spring uprisings, the Al-Khalifa monarchy faced a mass revolt by Bahrainis angered by a Sunni ruling dynasty that has long marginalized the country’s Shia majority. The uprising was crushed only after Saudi Arabia sent troops across the King Fahd Causeway. Manama also increased state spending to quell public anger.

But when oil prices tumbled, Manama found itself with no more cash. Rather than risk another revolt in their backyard, Kuwait, Saudi Arabia, and the UAE in 2018 stepped in to provide a $10 billion bailout.  Bahrain promised to improve its finances and diversify its economy. 

But little changed. Its budget deficit of 10 percent and debt of 135 percent of GDP regularly puts it among the top ten worst in the world. Days before the Iran War, Fitch downgraded Bahrain’s credit rating.

Betting on Washington and Tel Aviv

To attract investment, Bahrain pushed deeper into the western camp. In 2005, Manama dropped its boycott of Israel in exchange for a free trade agreement with the US. In 2017, Bahrain denounced the Arab League boycott of Israel and welcomed Israelis into the country. 

Three years later, it became the second Gulf Arab state after the UAE to recognize Israel under the Abraham Accords. In 2022, Bahrain signed a security agreement with Tel Aviv, followed by another with Washington the next year. At one point, Manama was even pursuing a free trade agreement with Tel Aviv.

Bahrain did pull its ambassador when Israel’s genocide of Palestinians in Gaza began in October 2023. But it has done little else. Israelis can still visit the country, and Bahrain was one of the first Arab states to condemn Hamas’ actions during Operation Al-Aqsa Flood. In 2025, Bahrain welcomed Israel’s new ambassador to the country.

There were payoffs. Bahrain-Israel ties could generate hundreds of millions of dollars. Manama has agreed to a $17 billion deal with Washington, including a $2 billion partnership with US companies to develop its aluminum industry in the hopes of diversifying its economy. 

Meanwhile, its closest ally, Saudi Arabia, was forging a different path. The kingdom has agreed to start selling its oil in Chinese yuan. This undermines its relationship with Washington, under which all oil would be sold in US dollars in exchange for military protection. Rather than rely on America’s protection, Riyadh signed a mutual defense agreement with Pakistan. Saudi Arabia has also expressed increased frustration at Israel’s continued aggression.

As Riyadh and Manama diverged, Bahrain drew closer to the UAE. Like Bahrain, Abu Dhabi has forged closer relations with the west, including Israel. The UAE is now one of the top three foreign investors in Bahrain, and non-oil trade has doubled over the last fifteen years. In 2025, the two countries held joint military exercises and, in the past week, discussed deepening cooperation.

Bahrain’s reliance on western-backed security networks grew more visible most recently, when Ukrainian President Volodymyr Zelensky visited Manama on 5 May to propose drone and defense cooperation against Iranian attacks. The visit reflected a kingdom increasingly dependent on external security partners, even as the region around it moves in a different direction.

The Hormuz Shock

Then everything came crashing down. In response to American and Israeli aggression, Iran seized control of the Strait of Hormuz, forbidding any hostile vessels from crossing, including from the GCC countries of Bahrain, Kuwait, Qatar, the UAE, and Saudi Arabia. 

Saudi Arabia can send some exports through the Red Sea. Until recently, the UAE could use its pipeline to export directly to the Indian Ocean. But Bahrain, Kuwait, and Qatar aren’t as lucky. Kuwait and Qatar have no significant pipelines connecting to Saudi Arabia. 

Bahrain has one connection, but it moves oil from Saudi Arabia to Bahrain, not the other way around. All three states have also suffered damage to energy infrastructure. Kuwait recently reported April exports of zero barrels, with similar data expected for Bahrain and Qatar.

The International Monetary Fund (IMF) projects negative economic growth in 2026 for Bahrain, Qatar, and Kuwait. Bahrain’s decline of 0.5 percent might seem modest, but there are several caveats. First, other than during the COVID-19 pandemic, this would be the first economic contraction in over 30 years. 

When Bahrain required a bailout in 2018, its economy was growing at 2.1 percent. Second, the IMF’s projection is based on the optimistic scenario that trade and production resume to normal by the middle of 2026. With Iran-US negotiations having not even resumed and GCC energy infrastructure destroyed, this is highly unlikely. 

Unlike the other GCC countries, Bahrain also has a small sovereign wealth fund. Qatar’s sovereign wealth fund is worth $580 billion, and Kuwait’s is worth $1 trillion. Both countries can sell some of their assets to continue providing government services amid the economic uncertainty. 

But Bahrain’s sovereign wealth fund is worth only $18 billion. And whereas Kuwait’s sovereign wealth fund (the oldest in the world) has invested in foreign assets, Bahrain’s investments are mostly domestic. Selling these assets would mean divesting from itself, further amplifying the economic crisis. 

Since the war began, Bahrain became the first GCC country to have its credit rating downgraded by Moody’s. Fearing it would not have sufficient foreign reserves, it entered into a currency swap with the UAE. But Abu Dhabi is likewise considering a similar deal with Washington, suggesting that the UAE Dirham is not as valuable as Bahrain believes. 

As the war continues, things could get even worse. Bahrain is an island whose only connection to the mainland is the King Fahd Causeway. In March, a drone struck the causeway, although causing minimal damage. 

In early April, it was closed due to an Iranian threat, which never materialized due to Iran and the US agreeing to a ceasefire the next day. But if fighting resumes, a single hit on the bridge could isolate the whole country.

Alone in the Persian Gulf

Whether the GCC will rescue Bahrain again remains uncertain. Gulf monarchies want to prevent unrest in Bahrain, where popular mobilization could inspire the region. But the GCC now has its own crises: Iranian attacks, economic decline, and rising domestic pressure. 

Although the bloc bailed out Bahrain in 2018, it withheld payment during the COVID-19 pandemic in 2020. Manama’s failure to repair its finances after the last bailout may harden that reluctance.

Bahrain’s closer alignment with Abu Dhabi comes as the UAE challenges Riyadh through its failed proxy war in Yemen, its interventions in Africa, and its exit from OPEC. If Bahrain becomes a firm Emirati ally, Saudi Arabia may see less reason to absorb the cost of another rescue.

Even if Riyadh chooses to intervene, geography may now limit its options. The Saudi military intervention in 2011 relied on the King Fahd Causeway, across which 150 military vehicles entered Bahrain.

If the causeway is destroyed, Saudi Arabia would struggle to move that force by sea, since it lacks large amphibious assault ships capable of transporting so many vehicles. The UAE has such vessels, but an intervention from Abu Dhabi would require a 400-kilometer voyage through the Persian Gulf under the threat of Iranian fire.

Bahrain is therefore trapped by the very alignments it has spent years cultivating. Its deepening bond with Abu Dhabi has complicated ties with Riyadh. Its western orientation has exposed it to Iranian retaliation. 

Its economy, weak long before the war, now faces high debt, a shallow sovereign wealth fund, damaged trade routes, and the possibility of physical isolation. 

Among the GCC states, Bahrain is the weakest link. The longer the Strait of Hormuz remains closed, the more exposed Manama becomes.