The effective closure of the Strait of Hormuz following US and Israeli attacks on Iran has triggered an unprecedented energy supply crisis, with Asian economies bearing the heaviest burden as oil tanker traffic through the world’s most critical oil choke point is paralysed.
Japan and South Korea face the greatest risk, as both nations overwhelmingly rely on fossil fuel imports transiting the Strait.
Tanker traffic paralyzed
The cost of hiring a supertanker to ship oil from the Middle East to China rose to an all-time high of more than $423,000 a day on Monday, doubling from Friday’s levels, according to LSEG data. Iran’s Revolutionary Guard Corps declared the Strait closed and warned that it would fire on any ship attempting to pass through.
The disruption comes after the assassination of Iran’s Supreme Leader Ayatollah Khamenei in joint US-Israeli strikes on Saturday, prompting Tehran to launch retaliatory attacks on multiple Gulf states. At least four vessels have been hit in Gulf waters and major shipping and insurance companies have effectively withdrawn from the corridor.
Kpler confirmed that commercial operators pulled out after insurers withdrew war risk coverage, creating a de facto shutdown. Only a small number of Iranian and Chinese flagged vessels (many operating outside Western classification and insurance systems) remain in transit.
Asia most exposed
Approximately 84% of crude oil and 83% of LNG that transited the Strait in 2024 were destined for Asian markets, according to the US Energy Information Administration. China, India, Japan and South Korea alone account for about 75% of oil flows through the chokepoint.
A report by Zero Carbon Analytics ranks Japan as the most vulnerable nation with a risk score of 6.4, followed by South Korea at 5.3 and India at 4.9. Japan obtains 87% of its total energy from imported fossil fuels, while South Korea depends on imports for 81%.
Japan called a National Security Council meeting to assess the situation, while South Korea’s Prime Minister ordered a government-wide emergency response.
Both countries have significant oil reserves as a short-term buffer. Japan’s combined public and private oil reserves cover about 254 days of domestic consumption, while South Korea has more than 210 days of supply.
However, LNG reserves tell a different story. Japan does not have underground gas storage and its terminal capacity covers just over a month of consumption, according to the IEA. South Korea faces a similar vulnerability to LNG. A prolonged closure of the Strait would make gas shortages a more immediate threat than oil shortages for both countries, given LNG’s critical role in power generation.
Kpler’s analysis adds that India faces the most acute short-term exposure and is likely to immediately pivot to Russian crude, while China, which recently moderated consumption of Russian crude, will likely abandon that restriction if the conflict spreads.
Oil price forecasts diverge sharply
Brent crude settled around $78 a barrel on Monday, up about 9% from Friday’s close, and analyst projections diverged sharply depending on the length of the disruption.
The shutdown creates a double supply shock: it halts current exports while stranding OPEC’s spare capacity behind the blockage. Analyst estimates range from $80 in the event of a short-lived disruption to $100-120 per barrel if the stagnation is prolonged, with risk premiums capable of driving prices well beyond model forecasts.
Alternative routes fall short
Bypass options are limited. Saudi Arabia’s East-West pipeline and the United Arab Emirates’ Abu Dhabi pipeline together offer about 3.5 million barrels per day of unused capacity, less than 20% of a total shutdown, according to Rystad. The IEA’s release of strategic reserves could help, but member countries account for less than half of global oil demand.
With Iran declaring “total war” on Israel and the United States, the crisis highlights the fragility of fossil fuel supply chains for Asian economies and may accelerate the push toward energy diversification.