Strait of Hormuz Crisis Sends Brent Crude Higher and Revives Inflation Fears

The world's most important energy chokepoint

The Strait of Hormuz, a narrow waterway between Iran and Oman, carries roughly 25% of the world's seaborne oil trade and about 20% of global liquefied natural gas before any conflict disruption. Since February 28, 2026, when the United States and Israel launched air strikes against Iran, shipping traffic through the strait has been severely restricted, with the Iranian Revolutionary Guard Corps issuing warnings, boarding merchant vessels, and laying sea mines.

The closure became the largest disruption to world energy supply since the 1970s energy crisis. Brent crude surpassed $100 per barrel on March 8 for the first time in four years, peaking at $126 per barrel. Although flows partially recovered through diplomatic efforts including the Islamabad Memorandum, renewed U.S. strikes in early September sent prices climbing again.

September escalation and current pricing

Brent crude climbed toward $96 per barrel on September 4, on track for a weekly gain of around 9%, underpinned by fresh U.S. strikes against Iran and growing uncertainty over shipping through the strait. Six commodity vessels transited the strait on Wednesday, down from 11 on Tuesday and compared with a 10-day average of nearly 13—far below the 25–30 tankers per day that passed in each direction before the conflict.

Analysts at ING estimate Persian Gulf oil exports at roughly 50% of pre-war levels, including pipeline bypass volumes, with Hormuz flows alone around 5 million barrels per day versus a pre-conflict norm near 20 million. U.S. officials estimate flows near 10 million barrels per day, while independent shipping trackers put them at 4–8 million, reflecting the difficulty of tracking vessels that switch off transponders during transit.

Inflation transmission channels

Higher Brent prices feed into inflation through multiple channels. Motor fuel costs rise directly for consumers, freight and logistics expenses increase for businesses, and input costs for petrochemical-dependent industries climb. Because core PCE inflation was already 3.3% year over year in July—well above the Fed's 2% target—the oil shock arrived at a moment when policymakers had limited tolerance for further price surprises.

European diesel prices reached their highest level since mid-2022 during the week, while inventories on the continent remain well below seasonal norms. Damaged refineries in the Middle East and Russia, coupled with insufficient spare capacity elsewhere, are expected to keep global fuel prices elevated into 2027 even if crude stabilises.

Scenarios for the months ahead

ING's base case assumes a stalemate persists until shortly before the November U.S. midterm elections, followed by a limited stabilisation agreement. Under that scenario, Brent averages $80 per barrel in the fourth quarter. An optimistic case—a September agreement restoring pre-war flows—would see Brent average $75. A pessimistic escalation scenario, with Hormuz and bypass routes increasingly disrupted, could lift fourth-quarter Brent to an average of $104 per barrel.

Capital Economics has warned that if the strait remains closed and OECD oil inventories continue depleting, the market could reach a tipping point around the start of the fourth quarter, potentially consistent with prices in the $120–140 range based on historical form. For businesses and consumers, the practical implication is that energy costs are likely to remain a source of inflation uncertainty through the winter heating season.