Hormuz Crisis: Oil Shock and Global Economic Risks

This article is written by Mian Haroon Masood, a political leader based in Gujrat, Pakistan.

The situation around the Strait of Hormuz is increasingly critical, with potential disruptions to global oil supplies raising serious economic concerns. Nearly 20 percent of the world’s oil passes through this narrow corridor, making it one of the most vital energy routes globally.

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A map showing the Strait of Hormuz and Iran. Tehran has disrupted shipping through the Strait of Hormuz — the artery that carries about a fifth of global oil. | REUTERS/Dado Ruvic/Illustration/File Photo.

Any prolonged conflict in the region could trigger a sharp rise in oil prices, with estimates suggesting that crude could climb to between $100 and $125 per barrel. Such an increase would likely fuel inflation while slowing economic growth—a combination commonly referred to as stagflation. The ripple effects would be felt across global markets in the weeks and months ahead.

Amid this uncertainty, some countries may seek alternative energy sources. Russia, for instance, could benefit from higher prices and increased demand, while China continues to maintain strong energy ties with Iran. For countries facing supply risks, Russian crude may serve as a temporary fallback option during periods of instability.

A satellite image shows the Strait of Hormuz, a key maritime passage connecting the Persian Gulf to the Gulf of Oman, vital for global energy supply. (Getty Images).

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Concerns are also growing over the vulnerability of key Iranian oil infrastructure, particularly facilities on Kharg Island. Any disruption there could significantly reduce Iran’s export capacity, further tightening global supply. A broader escalation involving sustained military exchanges would risk choking oil flows from multiple Middle Eastern producers, compounding the crisis.

In the longer term, diversification of energy transport systems may become increasingly important. While maritime shipping remains the dominant mode for oil transport, pipeline networks offer an alternative that could reduce exposure to geopolitical chokepoints. Projects such as the proposed Iran-Pakistan gas pipeline may regain attention, though past progress has been hindered by external pressures.

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Diplomatically, the situation calls for careful and proactive engagement. Pakistan, positioned between key regional players, faces the challenge of balancing its relationships while advocating for de-escalation. Effective diplomacy—marked by restraint and strategic clarity—could play a role in easing tensions and preventing further deterioration.

Overall, the evolving crisis underscores the fragility of global energy security. Without a diplomatic resolution, continued instability in the region could have far-reaching economic consequences for both regional stakeholders and the wider world.

Credit: Discovery Alert

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Oil and Pakistan

This article is written by Mian Haroon Masood, a political leader based in Gujrat, Pakistan.