Iran War Halts Hormuz; Oil Shock Spreads

The Strait of Hormuz closure has emerged as the defining macro shock of May, with Aramco warning that 100 million barrels per week of oil supply are being lost every week the chokepoint remains blocked. Saudi crude exports to China for June are set to plunge to 13-14 million barrels, signaling deep disruption to Asia's energy security. Trump's dismissal of Iran's latest peace proposal as "totally unacceptable" has closed the door on near-term de-escalation, keeping oil prices elevated and shipping routes through Hormuz severely constrained.

The shock is cascading across multiple asset classes and geographies. India is considering emergency measures to shore up foreign-exchange reserves, including curbs on gold and electronic imports and fuel price hikes. China's central bank warned of imported inflationThe rate at which prices rise across an economy. risks from higher oil and commodity prices. Japan and Korea are facing higher energy costs just as tech supply chains already feel strained. Thailand's largest refiner is diversifying crude sourcing toward Africa and the Americas. Norden, one of the world's largest commodity shippers, is now planning for a Hormuz closure lasting the entire year, a sign of deep structural uncertainty.

Aviation and logistics face acute pressures. A jet fuel supply crunch threatens summer travel plans across the Northern Hemisphere. Private refiners in China have requested government approval to cut run rates after being ordered to max production one month prior. Pakistan secured one rare LNG tanker exit through Hormuz by leveraging geopolitical leverage, but most nations cannot replicate this. The conflict has become "the most significant oil supply shock since World War II" per JPMorgan.

Markets are split on whether this is bullish for defense contractors and energy independents or a stagflationary risk that will eventually crack equity valuations. Near-term, oil rallies and geopolitical premium support equities. But if the war persists and inflationThe rate at which prices rise across an economy. accelerates, the narrative could flip sharply toward rate expectations and recession risk. Trump's rejection of Iran's offer suggests a protracted conflict, making this a live risk factor all week.