The ongoing closure of the Strait of Hormuz—a vital artery for the world's energy supply—has triggered alarm bells among global economists, with experts warning that the current disruption could unleash an economic shockwave far surpassing the infamous oil crisis of the 1970s.
For the past month, the narrow waterway has been effectively paralyzed amid the escalating conflict between the US, Israel, and Iran. Because the Gulf states export roughly 20% of the world's crude oil, alongside massive volumes of natural gas and refined products, the blockade threatens to choke the global economy.
International Energy Agency Director Fatih Birol recently issued a stark assessment, calling the current situation "the greatest global energy security threat in history."
"It is much bigger than what we had in the 1970s, the oil price shocks. It is also bigger than the natural gas price shock we have experienced after the Russia's invasion of Ukraine," Birol stated.
A Looming Pipeline Squeeze
The full impact of the geopolitical standoff has yet to hit consumers' wallets, but experts say a devastating lag effect is on the horizon. Lars Jensen, CEO of Vespucci Maritime and former Maersk director, explained that tankers which departed the Gulf over a month ago are currently completing their journeys to global refineries. Once those deliveries stop, the real squeeze begins.
"The oil shortages we've been seeing, they're only going to get worse, even if magically the Strait of Hormuz would re-open tomorrow," Jensen cautioned, adding that consumers will face crushing energy costs that could linger for up to a year after the crisis eventually resolves.
In an effort to break the bottleneck, US President Donald Trump has proposed deploying allied warships to escort commercial vessels and has threatened severe retaliatory strikes against Iran if maritime traffic isn't allowed to resume safely.
Echoes of the 1970s
Comparisons to the 1970s are inevitable, though the catalysts differ. The first major shock in 1973 was a calculated political maneuver, noted Dr. Carol Nakhle, CEO of Crystol Energy. In response to Western support for Israel during the Yom Kippur War, Arab oil producers instituted a targeted embargo and slashed production.
Within months, crude prices roughly quadrupled. The ensuing chaos featured widespread fuel rationing, soaring unemployment, and crippled economic growth. According to Queen's University Belfast researcher Dr. Tiarnán Heaney, the resulting inflation triggered severe social unrest, widespread strikes, and a harsh recession that ultimately helped topple the UK's Conservative government in 1974. A second devastating blow followed in 1979 during the Iranian Revolution.
A Nastier Mathematical Reality?
While the historical parallels are grim, some economists argue the modern world has learned from its past. Dr. Nakhle points out that today's global energy market is highly diversified and significantly less oil-dependent than it was half a century ago. Nations are better fortified with strategic petroleum reserves and coordinated emergency protocols.
However, the raw math paints a daunting picture. Alicia Garcia Herrero, chief economist for Asia Pacific at Natixis CIB, highlighted a terrifying discrepancy: the cataclysmic price spikes of the 1970s were driven by a mere 5% to 7% drop in global supply.
Today's crisis effectively traps 20% of the world's oil supply.
"Today's Iran war crisis can end up being a bigger shock if the situation does not improve soon," Garcia Herrero said, warning of severe inflation, crippling gas prices, and profound recession risks—particularly in Asia.
While modern efficiency and strategic reserves provide a temporary shield, Garcia Herrero noted that the sheer scale of the paralyzed supply makes the current crisis "nastier, with no fast fix in sight."