STRAIT OF HORMUZ — Iran blockaded the Strait of Hormuz in response to U.S. and Israeli strikes, disrupting global energy trade. The Strait of Hormuz has been mostly closed due to a crisis involving the war in Iran.

The waterway is a critical artery for global commerce, as around 80 percent of global trade by volume is transported by sea. Roughly one-quarter of all seaborne oil trade transits the Strait of Hormuz, while about one-fifth of global liquefied natural gas (LNG) shipments normally transit the strait. The geographic choke point is a waterway between the Persian Gulf and the Gulf of Oman that is about 104 miles long, with a width varying from about 60 mi to 24 mi.

PureSource News previously reported that the United States launched strikes on Iranian ports. PureSource News also previously reported that Qatar proposed a gas halt to prevent strikes. Fuels represent nearly 80% of final energy consumption, reflecting the scale of the disruption caused by the blockade.

Market data reflects the volatility surrounding the closure. Net positions held by hedge funds and other money managers in ICE Brent futures and options rebounded to the equivalent of more than 192 million barrels in the week ending July 21. Open interest in ICE Brent is down 11% year-over-year.

Hedge funds increased their net long positions held in ICE gasoil to 84,540 lots last week. ICE Brent crude was trading around $87 per barrel on July 28, 2026.

The disruption has immediate implications for European aviation fuel supplies. More than 40% of Europe's jet fuel imports originated from the Persian Gulf last year, according to S&P Global data. Sustainable Aviation Fuel (SAF) has recently been 3 to 5 times more expensive than conventional jet fuel. The closure of the Strait of Hormuz has reduced the price gap between SAF and conventional jet fuel, making SAF 1.5 to 2 times as expensive.

Regulatory frameworks for alternative fuels were established prior to the current crisis. The European Union signed an airline SAF mandate into law in 2023. A tax incentive for SAF survived changes to the Inflation Reduction Act last year, albeit at a reduced rate.

Ernie Moniz runs the Energy Futures Initiative. He commented on the broader energy transition challenges exposed by the reliance on fossil fuels. "We have not had anything like the success in producing affordable, scalable, low-carbon fuels to displace oil," Moniz said. "We need a lot of innovation on the fuel side."

Shipping insurers are monitoring the situation closely. A spokesperson for Gallagher stated that war risk insurance is still available. However, the spokesperson noted that only a handful of ship owners or charters are opting to travel through the Strait of Hormuz. David Roche is president and global strategist at Quantum Strategy, providing strategic analysis of the crisis.

The blockade of the Strait of Hormuz interrupts a vital node in the global supply chain, affecting both oil and liquefied natural gas flows. With fuels representing nearly 80% of final energy consumption and the majority of global trade moving by sea, the closure has widespread economic implications. The event shows the vulnerability of energy infrastructure to geopolitical conflict and the limited immediate availability of scalable low-carbon alternatives.

The market response indicates heightened risk perception among financial actors, with significant shifts in futures positions and sustained price levels for Brent crude. While insurance mechanisms remain operational, the practical decision by most shippers to avoid the strait demonstrates the severe operational constraints imposed by the blockade. The situation reflects the interdependence of global energy markets and the potential for regional conflicts to trigger broader economic disruptions.

Why It Matters

The blockade disrupts a critical artery where one-quarter of seaborne oil and one-fifth of global LNG normally transit, directly impacting Europe, which sourced over 40% of its jet fuel from the Persian Gulf. While existing mandates and tax incentives promoted Sustainable Aviation Fuel, the crisis has narrowed the price gap between SAF and conventional fuel, exposing the limited availability of scalable low-carbon alternatives. With fuels representing nearly 80% of final energy consumption, the closure shows how geopolitical conflict can immediately constrain global supply chains despite regulatory frameworks designed to foster energy transition.