Brent crude surges past $118 as Strait of Hormuz remains closed

Brent crude oil climbed above $118 per barrel Thursday as the Strait of Hormuz stayed effectively closed due to the ongoing Iran-Israel conflict, cutting off a waterway that normally carries roughly 20 percent of the world's daily oil supply. The closure is not a blockade in the traditional military sense. Iranian naval forces and shore-based missile batteries have made commercial tanker transit through the strait too dangerous for most shipping companies to attempt without a military escort, which most do not have access to.

The price move reflects a straightforward supply math. When 20 million barrels per day of oil cannot move through its normal route, the global market has to absorb that disruption through higher prices, alternative routing, or demand destruction. Alternative routing exists but adds cost and time. Supertankers that would normally transit the strait in hours face a weeks-long journey around the Cape of Good Hope if they divert south. That adds roughly $2 to $4 per barrel in shipping costs on top of the underlying price increase.

How long the strait has been effectively closed

Commercial tanker transits through the Strait of Hormuz dropped by approximately 85% in the nine days following the Israeli strikes on Iran, according to data from the shipping analytics firm Vortexa. A handful of vessels with military escorts from the US Fifth Fleet, which is based in Bahrain, have passed through, but those represent a fraction of normal daily volume. The US Fifth Fleet has the capacity to escort a limited number of vessels per day, not the 15 to 20 supertankers that would typically transit under normal conditions.

Saudi Arabia, the UAE, and Kuwait are among the countries most directly affected by the closure, since their primary export terminals feed into the Gulf. Saudi Aramco has begun rerouting a portion of its exports through the East-West Pipeline, which runs from the Eastern Province to the Red Sea port of Yanbu and bypasses the strait entirely. That pipeline has a capacity of approximately 5 million barrels per day, which is far short of Saudi Arabia's total export volume.

Trump's calls for allied help and the muted response

President Trump publicly called on allies to contribute naval assets to escort operations in the strait. The response was notably limited. Britain and France indicated they were considering involvement, which is diplomatic language for not yet committed. Germany said any deployment would require parliamentary approval, which takes time. Japan and South Korea, both heavily dependent on Gulf oil imports, expressed concern through diplomatic channels but have not offered military assets.

The reluctance reflects a real strategic calculation. Contributing naval forces to convoy operations in a live conflict zone means accepting the risk that those ships could be targeted by Iranian missiles. The UK's Type 45 destroyers and France's Horizon-class frigates have capable air defence systems, but no NATO ally wants to absorb a missile hit on a warship over a commercial shipping lane dispute while their own domestic politics are complicated.

What $118 oil means for inflation and supply chains

The inflationary effect of sustained high oil prices moves through the economy in stages. The first wave hits gasoline and diesel immediately, which affects consumers at fuel pumps and trucking companies whose diesel costs determine freight rates. The second wave hits manufactured goods, agriculture, and services as higher energy input costs work through production and logistics. Goldman Sachs estimated in a research note dated March 17, 2026 that every $10 sustained increase in Brent crude above $90 adds approximately 0.4 percentage points to US headline CPI over a six-month window.

At $118, that math produces roughly 1.1 additional percentage points of headline inflation compared to a baseline of $90 oil, assuming the price holds. Combined with the Fed's already-elevated 2.7% inflation projection for 2026, the arithmetic starts to look uncomfortable. The Fed's 2% target becomes harder to reach in any scenario where oil stays above $100 for the rest of the year.

Which economies are most exposed to the disruption

Asia-Pacific economies that depend on Gulf oil imports face the most direct exposure. Japan imports approximately 90% of its crude oil from the Middle East, with a large share transiting the Strait of Hormuz. South Korea imports around 70% of its crude from the Gulf region. India, which has been importing discounted Russian crude since 2022 to reduce Gulf dependency, still sources roughly 45% of its oil from the region.

European economies have more diversified supply sources, including Norwegian North Sea production, US LNG exports, and Caspian pipeline flows, but they are not insulated. Higher global oil prices affect every buyer regardless of supply source, since oil is a globally priced commodity. The European Central Bank will be monitoring the March CPI data closely when it publishes on April 3, given that energy prices are expected to be the primary driver of any upside surprise.

The IEA said in a statement Thursday that its member countries collectively hold strategic petroleum reserves totalling approximately 1.5 billion barrels, equivalent to roughly 75 days of net import cover. A coordinated release has not been announced. The last coordinated IEA release was in March 2022 following Russia's invasion of Ukraine, when member countries agreed to release 60 million barrels. Whether that option is activated depends largely on how long the strait disruption continues and whether Brent crude pushes toward $130.