The disruption in the Strait of Hormuz isn't a formal closure. Instead, shippers and producers are adopting a "wait and see" approach, halting flows due to reports of damaged ships and skyrocketing insurance premiums, effectively creating a self-imposed blockade.

Even a best-case combination of all available workarounds—rerouting pipelines, sanctions relief, and the fastest-ever strategic reserve release—would only mitigate 7 million of the 20 million barrels per day lost from a Hormuz closure. This leaves a practically unsolvable 13 million barrel per day shortfall.

Despite government actions like tapping strategic reserves and using alternate pipelines, these measures can only offset about 9 million barrels per day of the 20 million lost from the Strait of Hormuz. This leaves a massive 11 million barrel per day shortfall, dwarfing previous supply shocks.

Persistent threats in maritime chokepoints are forcing shipping companies to consider radical alternatives. The high speed of nuclear-powered ships (e.g., 30 knots) could make lengthy detours around continents profitable by enabling more trips, offsetting higher initial investment and operating costs.

Market focus on Hormuz is misplaced. The real emergent threat is the Bab el-Mandeb strait, controlled by Houthis. An attack there, potentially orchestrated by IRGC hardliners, could halt 4 million barrels/day of Saudi oil rerouted from the Persian Gulf, spooking insurers and causing a greater price shock than the Hormuz crisis.

Increasing global oil production is meaningless if the crude cannot be safely transported. The real challenge in modern energy conflicts is not total supply, but the logistical risk of moving it through contested chokepoints like the Strait of Hormuz, making transportation the primary driver of price instability.

While many fear production shutdowns, a more significant and probable risk is a logistical shock from shipping disruptions. Even modest delays in tanker transit times could effectively remove millions of barrels per day from the market, causing a significant price spike without a single well being shut down.

Despite historical precedent, using naval escorts to protect tankers in the Strait of Hormuz is logistically infeasible today. The sheer volume of traffic means convoys would take years to clear the backlog at the pace of 1980s operations, and the cost of protection could exceed the value of the cargo itself.

While Saudi Arabia can increase oil flows through its east-west pipeline to bypass the Strait of Hormuz, the ultimate constraint isn't the pipeline itself. The real bottleneck is the Port of Yanbu on the Red Sea, which has a fixed daily export capacity, limiting the effectiveness of the entire bypass strategy.