• Brent crude briefly turned positive amid diplomatic efforts to resolve the crisis.
  • The strait closure has disrupted 20% of global oil supply, causing production cuts and shipping reroutes.
  • Iran is paradoxically increasing exports at higher prices while blocking other traffic.

Oil prices showed volatility on Thursday, with Brent crude briefly turning positive as markets reacted to renewed diplomatic efforts to reopen the Strait of Hormuz. The key shipping lane has been effectively closed since February 28, 2026, following joint U.S. and Israeli military strikes that killed Iran's supreme leader Ali Khamenei, triggering retaliatory attacks and a halt in vessel traffic enforced by Iran's Islamic Revolutionary Guard Corps.

President Trump repeated calls for other nations to help reopen the strait, according to people familiar with the matter, sparking a temporary rally that saw Brent pare earlier losses. The benchmark had reached $126 per barrel at its peak after surpassing $100 on March 8—the first time in four years—but has moderated as markets price in expectations for a resolution. "Markets are betting Trump will declare the war to be over soon," one analyst at the Council on Foreign Relations noted, though they cautioned this optimism might be premature given ongoing tensions.

The closure has created the largest energy disruption since the 1970s oil embargo, blocking approximately 20% of the world's daily oil and natural gas supply. Tanker traffic dropped to near zero initially, with over 150 ships anchoring outside the strait to avoid attacks. This forced major shipping companies including Maersk, CMA CGM, and Hapag-Lloyd to suspend transits and reroute vessels around Africa's Cape of Good Hope, adding weeks to delivery times and significantly increasing costs.

Supply impacts have been severe. Kuwait declared force majeure on March 7, while Saudi Arabia reduced oil production by 20% on March 13 after shutting down offshore fields including Safaniya. Gulf Arab states collectively cut production by at least 10 million barrels per day as of March 12. Alternative pipelines cannot match the strait's capacity, leaving a deficit of approximately 12 million barrels per day despite the International Energy Agency's release of 400 million barrels from emergency reserves on March 11.

Paradoxically, Iran appears to be benefiting from the disruption. According to reports, Iran is actually exporting more oil through the strait now than before the war, at higher prices, capitalizing on the supply shortage while blocking other traffic. There are also indications that Iran might allow tankers to pass if payments are made in Chinese yuan, suggesting a potential shift away from the U.S.-dominated financial system.

Diplomatic negotiations are emerging as European governments including France and Italy discuss with Iran to ensure safe passage for their vessels. However, the situation remains precarious with the strait reportedly mined and ongoing missile exchanges. U.S. officials expect the conflict to end within weeks, which would likely trigger a rebound in energy supplies, but critics warn that further escalation could sustain elevated fuel prices.

The crisis has raised inflation and recession concerns in oil-importing nations, with uneven global impacts. In 2024, an estimated 84% of crude oil through the strait went to Asian markets, with China receiving a third of its oil via this route. Europe receives 12-14% of its LNG from Qatar through the strait. Meanwhile, Russia is earning as much as $150 million per day in windfall profits from the price spike, according to financial analysts.

Efforts to reach Iranian officials for comment on the export reports were unsuccessful. Without a diplomatic breakthrough, analysts project sustained supply shortfalls and further production cuts, keeping markets on edge as the world watches for signs of progress in reopening this critical chokepoint.

*Correction: An earlier version misstated the percentage of global oil supply disrupted; it is approximately 20%, not 25%.