Britain Is Watching the World’s Most Important Waterway Shut Down — And Counting the Cost

Oil is above $100 a barrel. UK wholesale gas prices have jumped sharply. The world’s most critical energy corridor is effectively closed. And nobody knows when it will reopen.

The sequence of events that produced the current crisis moved quickly. On 28 February, the United States and Israel launched coordinated military strikes against Iran in an operation code-named Epic Fury, targeting nuclear facilities and military infrastructure. The strikes killed Iran’s Supreme Leader Ali Khamenei. Within days, Iran’s Revolutionary Guard Corps had done what analysts had long feared but most governments had failed to fully prepare for: it closed the Strait of Hormuz — not with a naval blockade, but with cheap drones.

The closure was achieved not through mines or conventional anti-ship missiles but through selective drone strikes in the vicinity of the strait, which were sufficient to cause insurers and shipping companies to conclude that transit was too dangerous. All Iran had to do was several drone strikes in the vicinity of the waterway, and tanker traffic dried up. NPR

The consequences for global energy markets have been swift and severe. Brent crude, the international benchmark, surged above $100 per barrel as traders weighed the prospect of weeks or even months of turmoil. Al Jazeera Iran’s Revolutionary Guard has warned that the strait will not carry a litre of oil, and that the world should expect oil at $200 per barrel. Al Jazeera

For Britain, the shock arrives through several channels simultaneously. The UK does not import Gulf crude directly in most cases, but UK wholesale gas reacts when shipping routes are in play, even before a physical shortage materialises, because gas remains a key price driver in the UK power market. Even without an immediate physical shortage in Britain, the UK wholesale market moves on risk premium and sentiment. Tritility

Europe’s exposure through LNG is particularly acute. Europe receives between twelve and fourteen per cent of its LNG from Qatar, through the Strait of Hormuz. Wikipedia Qatar’s Ras Laffan facility, the largest LNG export complex in the world, has already been targeted by Iranian drones, raising fears about production disruptions that would compound the shipping crisis.

The UK government’s position has been delicate. Prime Minister Keir Starmer has confirmed that the United States may use British bases for defensive operations related to the conflict, and Britain is among the E3 nations — alongside France and Germany — that have signalled readiness to back proportionate military defensive measures against Iranian drone and missile attacks. The UK Maritime Trade Operations Centre has been tracking attacks on commercial shipping in the region, reporting over a dozen incidents in the first two weeks of the conflict.

The International Energy Agency has mounted its largest ever emergency response, coordinating the release of 400 million barrels of oil from strategic reserves across more than thirty nations, with the United States contributing 172 million barrels from its Strategic Petroleum Reserve. CNBC But analysts have been blunt that the release will not come close to addressing the supply gap left by the strait’s closure, and that until transit is reactivated, such policy announcements will have limited market impact. CNBC

Goldman Sachs and UBS analysts have warned that if the disruption extends through the second quarter of 2026, global headline inflation could rise by 0.7 to 0.8 percentage points, while global GDP growth could face a drag of up to 0.4 percentage points — effectively erasing the gains of the post-2024 global economic recovery. Faf

For households in Britain already navigating elevated energy bills, the timing is brutal. The full impact on domestic tariffs will depend on how long the crisis persists, but energy procurement advisers are already warning businesses to expect volatile pricing and faster intraday market moves for the foreseeable future.