The Blockade And Dilemma Of The Strait Of Hormuz

The Battle for the "Throat" of Global Shipping: The Blockade and Dilemma of the Strait of Hormuz

Since the start of the military strikes on February 28, 2026, Iran has announced the blockade of the Strait of Hormuz, directly severing the "lifeline" of global energy and trade. As the only strategic passage connecting the Persian Gulf to the outside world, the strait handles approximately one-fifth (20%) of global seaborne oil trade, with about 20 million barrels of crude oil passing through daily. It is also a crucial passage for important commodities such as liquefied natural gas (LNG) and fertilizers, with about a quarter of global seaborne crude oil trade relying on it. However, the shadow of war has effectively paralyzed this vital waterway. Data from the United Nations Conference on Trade and Development (UNCTAD) shows that shipping volume through the Strait of Hormuz plummeted by a staggering 97% after the outbreak of the conflict. Although international waters cannot be legally closed, as the Secretary-General of the International Maritime Organization stated, "Operationally, the risks are too great." Fear and the real threat deterred ship owners, with more than 150 oil tankers forced to linger and wait outside the Persian Gulf, hesitant to enter.

This paralysis stems from multiple predicaments:

Geographical disadvantage: The strait is only 33 kilometers wide at its narrowest point, making the channel extremely vulnerable to Iranian coastal fire (within 5-6 kilometers), resulting in very short reaction times.

Soaring costs: War risk surcharges have skyrocketed. Previously, war risk insurance costing over $100 per container has now increased to $2,000-$4,000 per container, a 30-fold increase. War risk insurance rates on vessel values ​​have also surged from the usual 0.25%-0.5% to over 3%.

Insurance difficulties: Several core marine insurance institutions have cancelled their war risk insurance coverage for this area, further exacerbating the risk and cost pressures on shipowners and cargo owners.

Faced with these high risks, major global shipping companies, such as Maersk and CMA CGM, have suspended or restricted routes through the region. Some vessels are considering circumnavigating the Cape of Good Hope in Africa, but this would result in an additional 10-20 days of voyage and higher costs. Meanwhile, ports such as Sohar and Duqm in Oman, and Khor Fakkan in the UAE, are being considered as alternative transshipment points, but their capacity is far from sufficient to compensate for the disruption caused by the Strait of Hormuz.

The Transmission Effects on China's Trade: From Oil Price Shocks to Supply Chain Restructuring

As the world's largest importer of commodities and a major manufacturing nation, China is inextricably linked to this crisis. In 2024, China's trade with the six Gulf states reached $257 billion, exceeding its combined trade with the US, UK, and EU. Therefore, the instability in the Strait of Hormuz poses multi-layered and severe challenges to China's trade.

1. Direct Impact: Logistics Disruptions and Uncontrolled Costs

For Chinese merchants deeply rooted in the Middle Eastern market, the impact of the war is direct and real. Jebel Ali Port in the UAE, the largest port in the Middle East, was temporarily shut down due to attacks during the conflict. This port is a crucial gateway for Chinese goods entering the Middle Eastern market; its closure led to a large backlog of goods and customs clearance difficulties.

Uncontrolled logistics costs are another nightmare. In addition to the aforementioned 30-fold increase in maritime war risk, air freight prices have also risen slightly. Yiwu's foreign trade businesses in the Middle East have almost come to a standstill, with zero new orders; building material merchants face the predicament of goods already in transit triggering risk warnings and subsequent orders being unable to be fulfilled. Many merchants have had to consider alternative routes such as transshipment via Oman, but this is unlikely to form mature transportation capacity in the short term.

2. Macroeconomic Level: The "Temperature Difference" Between Rising Oil Prices and the Chinese Economy

Research by CICC points out that the Middle East conflict is a typical supply shock, with its core impact being rising oil prices. Because China's energy intensity and industrial structure differ from those of Europe and the United States, the impact of this crisis on China exhibits a unique "temperature difference".

Input: Controllable Inflationary Pressure: Compared to Europe, Japan, and South Korea, whose energy dependence on foreign sources is as high as 60%, China's net imports of oil and natural gas account for less than 20% of its total energy supply, providing a buffer. Therefore, imported inflation directly caused by rising oil prices is relatively controllable.

Output: Complex Export Impact: On the one hand, the risk of stagflation overseas (economic stagnation + inflation) will suppress global aggregate demand, which is detrimental to China's exports. CICC predicts that under two oil price scenarios (moderate increase and sustained high levels), China's export growth rate in 2026 may be negatively impacted by 0.6 and 1.8 percentage points, respectively. On the other hand, as competitors such as Europe suffer more severe shocks in energy costs, some of their manufacturing capacity may be constrained, which in turn cedes market share to China's high value-added products, presenting a "one-sided" situation.

3. Supply Chain: Transmission from Manufacturing to Consumption The ripples of rising oil prices are gradually spreading outwards.

Manufacturing: Downstream industries, especially those sensitive to energy costs and at the end of the supply chain, will face squeezed profits. Upstream energy-related industries, however, may benefit from the price increase.

Consumption: Rising oil prices indirectly drag down consumption by suppressing economic activity and reducing residents' real disposable income. Research predicts that under two oil price scenarios, the growth rate of total retail sales of consumer goods in 2026 may be 3.0% and 2.7%, respectively, slightly lower than the original expectation.

Investment: Manufacturing investment may slow down due to the impact of exports. However, to hedge against the risks of economic downturn and ensure energy security, the necessity of infrastructure investment (especially in energy and power systems) is increasing, and it is expected to receive counter-cyclical support.

4. Future Variables: China's Role and Response

In this crisis, China is not only a victim but also a significant variable. As the largest buyer of Gulf crude oil, China possesses strong economic leverage. In the future, China may increasingly rely on diplomatic mediation and economic engagement to de-escalate the situation and ensure the stability of energy corridors. Simultaneously, this crisis will further accelerate China's energy transition, highlighting the strategic value of new energy sources such as solar and wind power.

In conclusion, the flames of war in the Middle East are not only scorching the desert but also battering the globalized supply chain. Every fluctuation in the Strait of Hormuz is precisely transmitted to the production plans of Chinese factories and the containers at their ports through oil prices, insurance rates, and shipping times. This crisis highlights the vulnerability of critical maritime routes and forces China, a manufacturing powerhouse, to make a longer-term and more profound strategic trade-off between ensuring energy security, stabilizing foreign trade channels, and accelerating energy transition. In the short term, the market will continue to fluctuate wildly between war and peace; in the long term, a more diversified and resilient global energy and trade landscape may be emerging as a result.