Memo: The Strait That Runs Through Everything
A narrow waterway most Americans couldn't find on a map is about to show up in their grocery bills, their gas tanks, and the price of nearly everything else
By Lois Parshley, research director, Public Citizen's Climate Program
In March 2021, a ship called the Ever Given ran aground in the Suez Canal and, for a week, became the most beloved object on the internet. The massive vessel — longer than the Empire State Building is tall — had wedged itself diagonally across one of the world’s most critical maritime chokepoints. The global economy was forced to wait while a small excavator on the bank made a series of photogenic efforts to dig it out.
People made memes. They snapped up merch. They learned new terms like draft depth and tidal window. It was a foreshadowing of today’s crisis in the Strait of Hormuz, and an early warning that a staggering amount of everything we use on a daily basis — running shoes, semiconductor chips, soda bottles, and fertilizer — moves through a handful of tiny, narrow waterways. When those passages close, even temporarily, the consequences fan out across the global economy.
Following U.S. and Israeli strikes, Iran effectively closed the channel between Iran and Oman and the United Arab Emirates, grinding one of the world’s busiest shipping areas to a standstill. Every day the Strait stays closed, prices rise. As Iran’s new leader pledges to keep it locked down, that shock won’t stay at sea. Here’s how it’s already rippling through energy markets, supply chains, and consumer prices.
When oil prices spike, history shows rippling effects.
The 1973 Arab oil embargo is the closest historical parallel. Oil prices quadrupled, and U.S. inflation hit 11% in 1974 as a result. A second shock followed in 1979 when the Iranian revolution tripled oil prices again. The Federal Reserve’s own historians say this period shaped monetary policy for a generation.
More recently, in 2007, the Senate’s Joint Economic Committee gamed out what might happen during a closure of Hormuz. It found that losing 17 million barrels a day for a month almost tripled oil prices, tanked the bond market, and shoved the economy into a recession. Since that report, the 25-mile-wide passage linking the Persian Gulf and the Gulf of Oman has only become more critical. Last year, more than 20 million barrels a day moved through the Strait, roughly a fifth of the world’s petroleum supply. Saudi Aramco’s chief executive warned that a prolonged halt could have “catastrophic consequences” for the global economy. Current global oil inventories were already at five-year lows prior to the crisis.
When energy costs jump, people have less money to spend on other goods and services, dampening economic activity while simultaneously pushing up overall prices. The Federal Reserve now faces a dilemma: tightening monetary policy to fight inflation can further slow the economy, while loosening policy to boost growth risks letting inflation become entrenched.
Expect the price at the pump to keep soaring.
In the weeks following the United States’ Feb. 28 attack, the national average gas price jumped over 80 cents, reaching $3.84 per gallon as of March 18. The Energy Information Agency is now projecting prices roughly 70 cents higher than last month’s forecast. Low-income Americans will be hit disproportionately: The majority of Americans were already spending close to 4% of their take-home pay on gasoline.
As a rule of thumb, every $10 increase in crude oil prices typically adds about $0.25–$0.30 to the U.S. average price at the pump. Iranian officials have warned that oil prices could reach $200 per barrel if the conflict continues, representing potential prices of $5–$6 per gallon.
Natural gas and heating costs will jump.
Roughly 20% of the world’s liquefied natural gas also goes through the Strait — much of it from Qatar, which halted its output after an Iranian drone strike. LNG infrastructure can’t be quickly rerouted or replaced, and LNG facilities in the U.S. are already running at full capacity.
Global gas prices have surged, which will increase production costs for energy-intensive goods, like aluminum used in packaging, as well as raise household energy bills. Goldman Sachs has estimated that if Hormuz shipping were halted for another three weeks, European gas prices could spike by 130%.
Your grocery store bill is about to go up.
A delayed but highly destructive second wave of inflation is building within the global food system. Energy costs play a massive role in agricultural costs, from the price of fertilizers to diesel-powered farm machinery and transportation.
Many fertilizers begin with natural gas, which is processed to extract hydrogen. Hydrogen is combined with nitrogen to produce ammonia, and ammonia mixed with carbon dioxide produces urea. About a third of global fertilizer trade normally moves through the Strait, and unlike oil, there’s no strategic reserve supply.
While the U.S. produces some of its own fertilizer, it’s still subject to global price volatility. The cost of importing urea to the U.S., for example, went up 30% in a week. These disruptions are hitting early in the spring planting season in the Northern Hemisphere. If farmers use less fertilizer, yields can drop, increasing global food prices, especially for imported staples like rice. The American Farm Bureau Federation warned this would “contribute to inflationary pressures across the U.S. economy,” and food prices could rise at least 2 percent as a result.
To make things worse, petrochemical feedstocks and resins shipments have been disrupted, stranding exports from Gulf producers. This increases the price of materials like polyethylene, polypropylene, and other essential inputs for food packaging. The Coca‑Cola Company previously warned that these kinds of packaging price increases will be passed on to consumers.
Semiconductors and medical services will see a similar supply crunch.
Another byproduct of natural gas processing is helium, and Qatar historically accounted for almost 40 percent of global supplies. Helium is essential in semiconductor fabrication, where its inert properties and extremely low boiling point are used for cooling and other high‑precision processes. It’s also vital for cooling the superconducting magnets in MRI machines, a mainstay of diagnostic medical imaging — shortages have previously forced hospitals to delay installations or seek alternative technologies. The U.S. sold off its helium reserve in 2024.
There’s no practical substitute, so a prolonged disruption could interfere with chip production timelines, potentially driving up prices for consumer electronics like smartphones, computers, and automobiles, as well as for healthcare facilities.
Expect sticker shock for EVs and other consumer electronics.
As a by-product of refining sour crude oil and processing natural gas, the Middle East produces roughly 24 percent of the world’s sulphur. Sulphur shortages will impact any mineral supply chains that require leaching, the process by which most of the world’s nickel, copper, cobalt, and uranium is produced. The sulphuric acid market was already in crisis before the Iranian conflict, with supplies tightening after Russia stopped exports.
Indonesia — which produces more than 60% of the world’s nickel — imports much of its sulphur from the Middle East. Its nickel refineries are the backbone of the electric vehicle battery supply chain. Some processing plants there carry only one to two months of inventory.
For Americans, this will quickly mean higher prices for EVs, consumer electronics, and the defense hardware that uses these metal alloys.
With air cargo overwhelmed, global trade is unraveling.
With ocean transit paralyzed, shippers have pivoted desperately to air freight — overwhelming it. Qatar Airways Cargo suspended operations following airspace closures, and other Gulf carriers are operating on restricted schedules. These cancellations have removed the passenger “belly capacity” that normally handles over half of all global air cargo. As a result, air cargo capacity has declined by 18 percent, and freight rates and shipping delays are growing.
Supply chain experts estimate that all of these factors will begin hitting shelves near you in about a month as diverted containers arrive in clusters, terminal congestion rises, and demand for trucks to move shipments from ports stacks up.
A 2024 study modeled maritime shipping disruptions and found that the Ever Given’s week-long blockage of the Suez Canal caused $136.9 billion in losses. The authors wrote, “Global losses and blockage duration have a nonlinear relationship, with losses escalating rapidly after 5 days.”
None of this was adequately planned for. The Trump administration assumed that Iran would not close the Strait because doing so would hurt Iran more than the United States. Multiple sources told CNN that was shocking, because planning for this exact scenario has long been considered a “bedrock principle” of national security policy.
Why oil shocks keep happening, and how we stop them.
The solution is not complicated. A transition to a more efficient, renewable energy system will reduce overall exposure to this kind of fossil fuel price volatility. Countries and regions that have moved fastest on that transition are now the most insulated from these supply shocks. Energy systems anchored in renewables are less vulnerable to external crises, and cheaper to operate over time. Continued reliance on fossil fuels, on the other hand, exposes countries to geopolitical risk just as viable, lower-risk alternatives are scaling rapidly. A drop in demand for oil and gas globally also translates into downward pressure on gasoline and home energy costs for Americans.
Instead, the U.S. is doubling down on risky, expensive energy sources. This summer’s One Big Beautiful Bill Act made significant cuts to the Inflation Reduction Act that hurt the wind and solar industries, and reinforced American reliance on oil and gas.
Meanwhile, the oil and gas industry are having a great war: U.S. oil companies will see a $63.4 billion windfall, according to consultancy Rystad Energy. The gas market is seeing a similar boost. Some of the largest beneficiaries include Venture Global, a liquefied natural gas exporter in the U.S. Gulf coast. Venture Global has about a third of its production available to sell wherever prices are highest, instead of tied to long-term contracts, which meaning it will earn much more money than usual. One analysis found that U.S. LNG exporters stand to pocket nearly $1 billion more per week than prior to the conflict — and if Qatari gas remains offline into the summer, U.S. LNG profits could reach more than $33 billion over the pre-Iran average. The scale of these profits underscores how the fossil fuel industry continues to profit at consumers’ expense.
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