Since the third Gulf War began three weeks ago, one number has captured the world’s attention: the price of crude oil. On March 16, Brent, the global benchmark, briefly hit $106 a barrel – its highest since July 2022, just months after Russia invaded Ukraine. US President Donald Trump has tried to keep prices down, sought help from NATO allies and oversaw the largest-ever release of strategic oil reserves. None of this has reassured traders that the Strait of Hormuz will reopen any time soon. About 10-15% of the global oil supply is stranded.
Many other items are also stuck. According to the Gulf countries, it is becoming increasingly clear that there is more to supply than oil and gas. Their vast hydrocarbon reserves make them ideal locations for companies processing raw materials. It also helps that they’re located between fast-growing Asia and prosperous Europe. And so 22% of the world’s urea, 24% of aluminium, one third of helium and 45% of sulfur comes from this region. As drones attack plants and the blockade of Hormuz disrupts exports, these vital supply chains are at risk. Three industries—transportation, manufacturing and food production—are already suffering. And the damage seems to be increasing.
First take transport and the refined products on which it depends. The near extinction of Gulf crude oil has created serious problems for Asian refiners. While more expensive, alternative supplies are lighter and contain less sulfur than plants built for processing. This increases refiners’ operating costs, causing their equipment to break down and producing less diesel and jet fuel – the scarcest products at the moment. Margins have fallen, leading to 5-15% reductions in processing in China, India, Japan and Thailand and elsewhere.
At the same time, the world’s largest Gulf refineries have shipped barely anything since late February. Some of the oil shipped via pipelines to Saudi Arabia and the United Arab Emirates (UAE) is unrefined. The same is true of the cargo carried by the few tankers that have dared to cross the strait. Ship-tracker Vortexa estimates that 125 product tankers, or 5% of the global fleet, are stranded in the Gulf.
That double whammy has China worried about turbocharging prices of gasoline, diesel and jet fuel in Singapore, Asia’s oil-trading hub — prompting it to suspend all refined-product exports (see Chart 1). Europe is also feeling the pressure: last year it imported 69% of its jet fuel from the Gulf or Asia. The cost of shipping fuel is very high everywhere.
The crisis will get worse before it gets better. Modeling by Michel Brouhard of Kpler, a data firm, shows that if Hormuz remains blocked, Oceania would burn 80% of its jet-fuel stocks within 36 days; Within Africa 23. There will be a serious shortage of petrol in Asian countries outside China, Japan and South Korea within 12 days. Many poorer places are already closing schools, reducing work weeks and rationing fuel. Even a rapid reopening of Hormuz will not quickly restore normalcy due to refinery damage, broken infrastructure and shippers’ reluctance to return to the Gulf.
Manufacturing is another industry under severe pressure, because of its dependence on Gulf petrochemical plants, which are unable to export their goods on a large scale. The region accounts for about 45% of global seaborne naphtha flows and 23-30% of exports of other major plastic inputs including styrene and polyethylene. Many Asian plastics manufacturers have already declared force majeure, meaning they are unable to fulfill contracts due to factors beyond their control.
The active compounds in most drugs, from aspirin to antibiotics, also require petrochemicals. China imports large quantities of petrochemical feedstock from the Gulf; India, the world’s largest generic drug manufacturing company, has also been exposed. In addition, the Gulf supplies 26% of the world’s industrial diamonds (essential for cutting and drilling tools), 26% of glycol (a paint ingredient) and 30% of methanol (used in plastics, resins, chemical production and construction materials).
The biggest impact has been on aluminum, which is used in packaging, transportation, power grids and renewable energy. Qatar’s mega-smelters are short of gas, while plants in Bahrain and the United Arab Emirates cannot export. All are dependent on imported raw materials which they are no longer able to get. Although Oman exports aluminum from a port located outside the strait, it is under attack and shipping costs are rising.
As a result, the price of aluminum delivered in three months on the London Metal Exchange rose $300 to $3,440 a tonne – the highest in four years. The crisis is greatest in the regions most dependent on Gulf supplies: Europe, where their imports account for 14%, and the US, where their imports account for 21%. Delivery premiums for both have hit records (see Chart 2).
Iran is also an important supplier of semi-finished steel, i.e. billets and slabs, to Asia. As exports have fallen, prices of key grades have surged. Laura Stoyanova of Argus Media, a price-reporting agency, says the crisis has made slabs, an intermediate product, even more expensive than hot-rolled coils, the finished goods. As if a lump of raw flour has become costlier than cooked bread.
Perhaps the most unexpected industrial casualty is helium, a gas that is needed to cool supermagnets used to make semiconductor chips, and which is a byproduct of liquefied natural gas (LNG). Qatar produced 17 metric tons of helium per day – about a third of the global supply – at Ras Laffan, the megacomplex that produced and shipped about a fifth of the world’s LNG until the war. However, Ras Laffan is now closed, and there is no ready alternative to helium.
Even more ominous is the threat to global food production, the third industry most severely affected by the war. The United Nations estimates that one third of the global marine fertilizer trade passes through Hormuz. About two-thirds of it is urea (often produced from natural gas); Most of the rest is phosphate. Poorer countries will be hardest hit: Kenya, Pakistan, Somalia, Sri Lanka and Tanzania each source more than a quarter of their fertilizer from the Gulf. For Sudan, this has increased to more than half.
Prices are already rising rapidly. The price of urea has increased by 35% since the war began (see chart 3). Fertilizer was already expensive: Over the past three months, delivery prices to the US have increased by more than 70%.
Sulfur, another plant nutrient, is also in short supply. Prices have risen 40% since the end of February, surpassing the previous peak in 2022. One trader says the regional market for short-term deliveries is “at a standstill”. In addition to sulfur’s use as a fertilizer, sulfuric acid is essential for extracting metals from ore in copper and nickel processing. Miners in Indonesia and Africa are looking for alternatives.
Sven Tore Holsether, chief executive of Yara, one of the world’s largest fertilizer companies, warned that a prolonged closure of Hormuz would be “catastrophic” for food supplies. With spring planting imminent throughout the Northern Hemisphere, farmers face painful choices: pay increasingly higher prices, reduce application rates or plant less corn and wheat (the most nutrient-intensive crops). On March 13, US Agriculture Secretary Brooke Rollins described the fertilizer crisis as a “national security issue”, saying the government was examining financial “solutions” to support farmers.
The countdown has started for the industries suffering from all these shortages. Fertilizer that is delayed by weeks cannot be used for the 2026 crop. The adverse effects of stopping metal processing midway may last till 2027. Restarting idled refineries, smelters and petrochemical plants – which operate under extreme temperatures and pressures – could take several months. Many of the world’s supply chains pass through the 54-km-wide channel with Iran. How vulnerable this makes them is only now becoming clear.