NextFin News, Hong Kong -- On the night of last Saturday, Iran’s Islamic Revolutionary Guard Corps (IRGC) Navy announced via VHF radio that no vessels are permitted to cross the Strait of Hormuz, effectively declaring the critical maritime chokepoint closed, marking a rare and significant disruption to a critical global oil route.
The annoucement came after the United States and Israel launched daylight military strikes on Iran, killing 48 senior officials, including Supreme Leader Ayatollah Ali Khamenei. Iran retaliated by bombing Israel and U.S. facilities in the Middle East with missles and drones.
The blast occured across the Middle East, including UAE, Qatar, Quwait. Its repercussions are felt not only in the Middle East, but also in the trading floor of the global energy market. This is the first time the market had been jolted. Just eight months ago, the “12-day war” of June 2025 was still fresh: oil prices surged on the first day the fighting broke out, then took a “high-diving” plunge after both sides announced a ceasefire, tracing a “A-shaped” move that ultimately proved to be a false alarm. This time, though, the situation appears far more complicated. Talks between the United States and Iran in Geneva ended without results just two days before the "preemptive" strikes initiated by Israel, and U.S. President Donald Trump had already delivered a harsh warning ahead of the airstrikes.
When the roar of fighter jets replaces diplomatic phrasing, what truly tests the industry isn’t the strikes themselves. Is it Kharg Island’s oil pipelines, severing Iran’s export lifeline of 3 million barrels per day? More worth pondering is that this crisis has exposed a long-concealed weak point in the global energy system: when more than 70% of crude imports for East Asia’s economies still have to pass through a war zone, how solid is so-called “energy security”?
Strait of Hormuz, a Strategic Chokepoint
Despite the explosions reported in Tehran, commodity traders aren’t focused on the Iranian Supreme Leader’s residence, but on a tiny island of less than 50 square kilometers in the northeastern Persian Gulf: Kharg Island.
This small island, 25 kilometers off Iran’s mainland, handles roughly 90% of Iran’s oil-export loading and shipments. Because the waters along Iran’s mainland coast are too shallow and littered with reefs, Kharg Island is effectively the only outlet for exports in large oil tankers. A columnist for Turkey’s Sabah newspaper, Tutar, had warned even before the airstrikes that Israel has long insisted on striking or occupying the oil terminal on Kharg Island.
This is the difference between the ongoing conflict and the “12-day war” of June 2025. In last year’s confrontation, the two sides were more like they were “trading scorecards,” with most strikes aimed at military facilities, while oil infrastructure emerged unscathed. This time, Iran announced the closure of the Strait of Hormuz.
Data from the U.S. Energy Information Administration shows that about 20 million barrels of oil and petroleum products passed through the Strait of Hormuz each day in 2024, roughly one-fifth of global oil consumption.
Don’t be misled by the headline figure of Iran producing 3.6 million barrels per day. In today’s global oil supply-and-demand landscape, what truly drives price direction is not output, but “tradable volumes.” Iran exports about 3 million barrels a day, roughly 3.4% of global crude trade. That may not sound like much, but with OPEC+ spare capacity at only 3–4 million barrels per day—and concentrated almost entirely in Saudi Arabia—any supply disruption of more than 2 million barrels per day would instantly wipe out what little buffer the market has left.
More importantly, the way such a hit distorts market expectations is persistent. Even if the conflict ended the same day, as long as Kharg Island was still belching black smoke, tanker operators would not risk calling at the port, insurers would sharply raise war-risk premiums, and Iran’s exports would, in effect, grind to a halt well before repairs were actually completed. That is exactly the scenario the oil market fears most: not “a cutoff,” but “uncertainty over how long the cutoff could last.”
Asia’s Vulnerability in Energy Supply
If the conflict expands, who will hurt the most? The answer is neither the United States nor Europe, but East Asia.
Data from 2025 revealed a brutal reality: crude oil shipped through the Strait of Hormuz accounted for about 20% of global seaborne volumes, and China, India, Japan, and South Korea together absorbed 75% of that flow. Among them, Japan and South Korea were the most exposed—87% of Japan’s oil imports and 81% of South Korea’s relied on this maritime lifeline.
This is the biggest way it differs from past Middle East conflicts: in previous oil crises, Europe and the United States suffered the most. Today, however, thanks to the shale revolution and strategic petroleum reserves, the West has long since built a relatively solid firewall. Asia’s manufacturing powerhouses, by contrast, have—almost in unison over the past decade—made the same choice: to keep relying on cheap Middle Eastern oil rather than grit their teeth and push forward with the energy transition.
Data show that in 2023, renewables accounted for only 9% of South Korea’s power generation—far below the OECD average of 33%. Over the same period, Japan ranked first in the G7 for its dependence on fossil fuels. This kind of “strategic inertia” can be explained as “cost optimization” in peacetime, but in today’s world of frequent geopolitical conflict, it turns into “having a noose around your neck and still thinking you tied yourself a necktie.”
Ironically, the blast on February 28 delivered an expensive lesson in risk to Asian countries. When the Strait of Hormuz is drawn into war, Asian oil tankers would have to detour around the Cape of Good Hope, adding 15 days to the voyage and driving freight fees up by 250%. That cost would ultimately be passed on to every consumer—from gas stations in Tokyo, Japan to chemical plants in Mumbai, India to textile factories in Shenzhen, China.
Who Benefits From High Oil Prices?
At a moment when everyone is talking about U.S.-Israel attacks on Iran and geopolitical risks, one question needs to be put plainly: are high oil prices really nothing but bad news?
At least for some players, the “war premium” brought by this round of conflict isn’t exactly unwelcome. After the wave of bankruptcies in 2020, U.S. shale producers have remained wary of ramping up output aggressively. The hefty cash flow that comes with high oil prices allows them to pay down debt and buy back shares, rather than repeat the old race-to-produce spiral. As long as the conflict doesn’t reach U.S. soil, high oil prices are a “free dividend” for these companies.
An even bigger variable lies within OPEC+. Saudi Arabia holds the vast majority of the world’s spare capacity—about 2.2–2.5 million barrels per day. It’s a card that can be played at any moment, and also a Sword of Damocles hanging over the market. If oil prices surge too sharply and stay elevated for too long, will Saudi Arabia heed Washington’s call and boost output on a large scale? Or, with Russia coordinating, will OPEC+ choose to “hold position” and simply enjoy the fiscal windfall that comes with higher prices?
There’s no standard answer. But one thing is clear: the idea of “OPEC+ increasing output to cool oil prices” is, at its core, a political decision rather than a market act. Once the smoke over Tehran clears, what will truly shape oil prices over the long run will be the signals conveyed through the phone line between Crown Prince Mohammed bin Salman and the White House.
In addition, this conflict is quietly reshaping global LNG (liquefied natural gas) trade flows. After losing Russian pipeline gas, Europe has become more dependent on Middle Eastern LNG. If shipping through the Strait of Hormuz is disrupted, Qatar’s giant LNG carriers will be unable to sail out as well. In that scenario, Europe will have to compete even more fiercely with Asia in a spot-LNG buying scramble. This “gas-price linkage” effect would, in turn, further push up the central range of oil prices.
Energy Independence
More than short-term oil-price volatility, what deserves closer attention is the deeper impact this conflict could have on the global energy transition. This is not as simple as saying “high oil prices are good for renewables.”
Over the past decade, the main drivers of the global energy transition have come from two sources: pressure from climate policy, and falling technology costs. But this conflict offers a new narrative: national energy security. When Japan and South Korea realize that 87% and 81% of their energy demand must pass through a strait that could turn into a war zone at any moment, any debate about “cost” suddenly rings hollow.
This may force major Asian importing countries to reassess their own energy mix. India has increased oil purchases from the U.S. and Russia in recent years, but data from the Statistical Review of World Energy show that its dependence on Middle Eastern oil still stands at over 50%. Even as China vigorously expands its wind and solar capacity, its crude oil imports in 2025 still held above 11 million barrels per day, with about half coming from the Middle East.
The real turning point may come at the policy level. If this conflict lasts more than two weeks, countries such as Japan and South Korea may roll out aggressive energy-storage deployment plans, or reopen discussions about restarting nuclear power. Options that face formidable resistance in peacetime may find new openings under the logic that “energy security comes above all else.”
Murray Worthy, a researcher at a zero-carbon analytics organization, had warned even before the conflict: “These are very real risks. Countries should recognize them soberly and rethink their energy and economic security strategies.”
Whether the February 28 airstrikes will prove to be a brief storm or the prelude to a new round of prolonged turbulence remains impossible to say for now.
Looking back at history, the conflict in June 2025 showed that as long as oil facilities remain intact and the strait stays open, the market can regain its composure within days. What is different this time is that Kharg Island’s location is far too sensitive, and the collapse of U.S.-Iran talks has left both sides with little diplomatic buffer room.
For the energy industry, the most urgent thing to watch out for right now isn’t whether oil prices will climb to $100 or $120, but a more fundamental reality: the “safety buffer” built into the global oil supply system is disappearing. Whether it’s OPEC’s spare capacity or the Strait of Hormuz’s ability to keep shipping lanes open, both are already close to their limits. The next crisis may not be as “scary, but ultimately uneventful” as it was in 2025.
When a bomb falls near the Strait of Hormuz, every oil-dependent country in the world should redo the math on its own “energy nationality” problem.
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