$116 Oil and Counting

The Strait of Hormuz is a 21-mile-wide passage between Iran and Oman at the mouth of the Persian Gulf. It is, by virtually any measure, the single most important piece of water on Earth for the global economy.

On February 28, 2026 — the first day of Operation Epic Fury — Iran closed the Strait of Hormuz. The IRGC Navy deployed mines, cruise missiles, drone boats, and coastal defense systems to enforce the blockade. Oil majors immediately suspended shipments. Insurance companies tripled premiums. By Day 7, there were zero oil shipments through the strait in a 24-hour period.

The closure cannot be replaced. There is no pipeline or alternative route capable of handling 20 million barrels per day. The Strategic Petroleum Reserve releases — 172 million barrels from the US, 400 million globally — bought weeks, not months. They are a tourniquet, not a cure.

By Day 28, Iran had begun blocking even Chinese-owned ships — previously considered “friendly” traffic. Iran is formalizing a “toll booth” regime, charging ships millions for safe passage. The IRGC commander responsible for the blockade, Alireza Tangsiri, was killed by an Israeli airstrike on Day 27. The blockade continued without him.

The 2026 oil shock is unique in several ways. Unlike 1973 (embargo by choice) or 2022 (sanctions by choice), the Hormuz closure is an active military blockade by a nation at war. It cannot be resolved through diplomacy alone — it requires either military reopening of the strait or an end to the war itself.

Unlike previous shocks, this one also targets LNG infrastructure. Iran's strike on Qatar's Ras Laffan terminal — sidelining 17% of Qatar's LNG capacity for 3-5 years — means the natural gas market will feel this shock long after the oil market recovers. Europe, which pivoted to LNG after cutting Russian pipeline gas, is especially vulnerable.

On March 19, Iran struck Ras Laffan Industrial City in Qatar — the world's largest LNG export terminal — with missiles. The strike sidelined 12.8 million tons of annual LNG capacity, approximately 17% of Qatar's total output.

QatarEnergy estimated the damage would take 3 to 5 years to repair. This single attack will cost the global energy market more than most entire wars. European natural gas prices immediately more than doubled from pre-war levels, hitting a 3-year high. Brent crude spiked to $119/barrel intraday.

The Ras Laffan strike was retaliation for Israel's attack on South Pars — the world's largest natural gas reserve, shared between Iran and Qatar — the day before. The energy infrastructure war escalated from zero to catastrophic in 48 hours, with both sides targeting the other's most critical assets.

Qatar — which had been trying to mediate between the US and Iran — condemned the Israeli South Pars strike as a “dangerous and irresponsible step.” Then Iran struck Qatar's own LNG terminal. The Gulf states are paying the price for a war they didn't start, with energy infrastructure they spent decades building.

The oil price shock gets the headlines, but the war's impact on global food supply may prove more devastating in the long run.

30% of the world's fertilizer is shipped through the Strait of Hormuz. With the strait effectively blocked, fertilizer supply chains have collapsed. The consequences are cascading:

• •India — facing critical fertilizer shortages; dependent on Gulf imports for agricultural inputs that feed 1.4 billion people
• •US farmers — corn and soy producers “begging Trump for relief” as fertilizer prices surge and planting season approaches
• •China — has restricted fertilizer exports to protect domestic supply
• •Australia — farmers planting less due to fertilizer costs and uncertainty
• •WTO — warns of worst trade disruptions in 80 years

Iran itself suspended gas flow to Iraq to shore up domestic supplies. Iraq shut port operations. The war is not just disrupting energy markets — it's threatening the food security of billions of people in countries that have nothing to do with the conflict.

The financial cost of Operation Epic Fury is staggering — and it's being paid by American taxpayers and consumers from multiple directions simultaneously:

Add it up: $200 billion in direct military spending requested. $140 billion/year in higher fuel costs. $13.8 billion in SPR depletion. Trillions in market losses and economic drag. This is the most expensive foreign policy decision since the Iraq War — and it's being made without a congressional authorization for the use of military force.

The administration's response to the oil crisis has been a series of increasingly desperate measures — each one an implicit admission that the war is causing more economic damage than anyone anticipated:

• 1.Strategic Petroleum Reserve release — 172 million barrels from the US, 400 million globally through the IEA. A temporary measure that depletes reserves meant for genuine emergencies.
• 2.Relaxing sanctions on Iranian oil — Treasury Secretary Bessent relaxed sanctions to allow ~140 million barrels of Iranian oil already at sea to be sold. An extraordinary admission: the war is causing more economic damage than the sanctions it was meant to enforce.
• 3.Jones Act waiver — Trump waived the Jones Act for 60 days to allow foreign-flagged tankers to move oil between US ports. A measure normally reserved for hurricanes.
• 4.Pressuring allies — Trump called on China, France, UK, Japan, and South Korea to send warships to reopen Hormuz. Called NATO “cowards” when they refused. Called UK ships “toys.”
• 5.48-hour ultimatum (postponed twice) — Trump threatened to destroy Iran's power plants if Hormuz wasn't opened. Extended the deadline to April 6 after markets panicked. The threat itself caused oil to spike.
• 6.$20 billion DFC insurance — Announced a $20 billion insurance plan for American businesses' overseas losses. Taxpayer-funded insurance for damage caused by a taxpayer-funded war.

Each measure is a Band-Aid on a gunshot wound. The only thing that will restore oil prices to pre-war levels is ending the war and reopening the Strait of Hormuz. Everything else is theater.

The economic damage extends far beyond the United States:

• 🇵🇭Philippines — First country to declare a national energy emergency over the war. Imports 90% of its fuel. Turning to Russia and China for supply.
• 🇰🇷South Korea — Urging citizens to take shorter showers and avoid charging EVs at night.
• 🇪🇸Spain — €5 billion aid package + rent freeze. PM Sánchez: “We don't support this war.” Increasing Algerian gas imports.
• 🇩🇪🇵🇱Germany & Poland — Passed fuel price controls to protect consumers.
• 🇷🇴🇭🇺Romania & Hungary — Capping fuel prices.
• 🌍Global — AWS data centers knocked offline by Middle East drone attacks, disrupting cloud services worldwide. Amazon, a company that runs 32% of global cloud infrastructure, is now a casualty of war.

The war has transformed the global economic order in 30 days. Countries are hoarding energy, restricting exports, imposing price controls, and scrambling for alternative suppliers. The liberal international economic order — built on free trade and open shipping lanes — is fraying in real time.