Iran conflict pushing crude flows and inflation; Hormuz throughput down 29%, adding pressure on importers

The Iran war has morphed from a geopolitical risk into a structural energy supply shock. US and allied naval operations have constrained flows through the Strait of Hormuz to unprecedented levels, with Q1 throughput down 6 million barrels per day compared to pre-conflict baselines. This is not a temporary disruption; it represents a seismic reordering of global energy supply chains that will persist as long as the conflict does. For context, the Strait typically handles roughly 20% of global petroleum trade, making even modest percentage declines material for oil importers worldwide.

Turkey's central bank has been forced to raise inflationThe rate at which prices rise across an economy. forecasts as energy prices cascade through its economy, straining the CB's credibility on its ambitious disinflation target. Similarly, Pakistan, which imports most of its crude, faces an acceleration in growth expectations even as fuel-cost pressures mount. Bangladesh's Fitch outlook was downgraded to 'negative' citing vulnerability to the Middle East conflict. Air New Zealand forecasted a substantial full-year loss driven solely by jet-fuel cost surges. These aren't isolated incidents; they're symptomatic of an energy shock spreading through the global economy.

The geopolitical layer complicates any swift resolution. Chinese tankers are testing US naval blockades; North Sea crude has begun trading at discounts for the first time during the conflict as immediate fear eases, yet long-term uncertainty remains elevated. Some energy importers are diversifying supply routes (e.g., Ukraine targeting higher corn exports despite fertilizer shortages from Iran conflict spillovers), but the underlying macro math is clear: higher structural energy costs = lower real incomes for consumers in developed markets, stickier inflationThe rate at which prices rise across an economy., and reduced central bank optionality on rates.

This frames the inflationThe rate at which prices rise across an economy. shock differently: it is not transitory Fed-tightening friction, but a real terms-of-trade shock that will persist. Energy exporters (Russia, Saudi Arabia, etc.) benefit at the expense of importers. The policy response is constrained; central banks cannot solve a supply shock with rates. Expect further downgrade cycles from multilateral institutions and further repricing of growth expectations through mid-2026.