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.

By attacking just a few ships, Iran creates enough perceived risk to make insurance carriers unwilling to cover vessels transiting the Strait of Hormuz. This effectively disrupts 20% of the world's oil supply without needing a large-scale military blockade, a key tactic in asymmetric economic warfare.

The 20 million barrels of oil flowing daily through the Strait of Hormuz represent 20% of global supply. A blockade constitutes a disruption four times larger than the Iranian Revolution or Yom Kippur War embargoes, with no simple replacement.

The war in Iran is choking the Strait of Hormuz, which handles 20% of global oil. This disruption impacts nearly three times more oil volume than Russia's exports at the start of the Ukraine war, posing a significantly larger threat to the global economy and inflation.

When commercial insurers cancelled war risk coverage for vessels in the Strait of Hormuz, the US government stepped in to provide political risk insurance. This ensures the flow of global trade and energy, demonstrating a powerful, non-obvious tool of economic statecraft.

The Middle East conflict has moved beyond risk to a physical blockade of the Strait of Hormuz. With commercial tankers no longer transiting, nearly 20% of global oil is cut off from markets. This supply disruption, not just a risk premium, is driving oil prices toward $100/barrel.

The immediate oil price risk from the Iran conflict isn't just the temporary blockage of the Strait of Hormuz. The greater danger is a kinetic strike that damages critical infrastructure like pipelines or ports, which would take significant time to repair and create a prolonged supply crisis.

Iran effectively weaponized the Strait of Hormuz not with mines, but by creating enough uncertainty to make UK-based insurance companies pull out. This demonstrates how financial systems can be leveraged as powerful geopolitical choke points.

The conflict's primary impact on oil is not that supply is offline, but that its transport through the Strait of Hormuz is blocked. This distinction is key to understanding price scenarios, as supply exists but cannot be delivered.