Oil Climbs on Strait of Hormuz Closure; Energy Importers Face Margin Pressure

The Middle East war has effectively shut down one of the world's most critical chokepoints for energy transit. The Strait of Hormuz, through which roughly 21% of global petroleum flows, has seen minimal traffic for over two months as shipping operators avoid the danger zone. Oil markets have responded by pushing prices higher and extending what is now a multi-week premium that shows no signs of reversing until the conflict resolves.

Dow Chemical CEO Jim Fitterling stated the company is "hardly moving anything" through the strait and expects it could take 275 days for normal operations to resume. Vitol Group is now offering Iraqi Basrah crude outside the strait, a sign that some shipments are finding alternative routes, but these workarounds add time and cost. Supertanker counts through the strait have shown only slight increases in recent days, suggesting most shipping is still avoiding the region.

The energy shock is reshaping asset allocation across the board. Oil futures remain elevated, lifting energy stocks and commodity currencies. The US dollar's correlation with crude is now at its most positive in history, as higher energy costs fuel inflationThe rate at which prices rise across an economy. fears that keep real rates supported. India is tightening gold import rules to defend its rupee, and the ECB's Governing Council member Yannis Stournaras warned that sustained high oil could force a rate hike. Pension funds and institutional investors are rotating into energy exporters' sovereign debt and equities (TCW Group added exposure to EM oil exporters' government bonds), while energy importers face margin compression.

Energy-dependent sectors like transport, utilities, and consumer goods are under pressure. Airlines, including Spirit (which collapsed, accelerating industry consolidation), and freight operators face fuel surcharges that offset demand improvements. Defense budgets, by contrast, are benefiting from elevated geopolitical risk premiums. The broader equity market is ignoring the supply shock for now, but further escalation could force a recalibration of growth expectations.