CA AMANDEEP SINGH
Quick Summary
Iran's Hormuz Gambit: How a 21-Mile Strait Made the World an Economic Hostage In Brief: On 28 February 2026, the US and Israel launched strikes on Iran, killing Supreme Leader Khamenei. Iran's response of closing the Strait of Hormuz, triggered the worst energy and food security shock since the 197
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FAQ :
The Strait of Hormuz is a 33-kilometer-wide passage between Iran and Oman connecting the Persian Gulf to the open sea. It is crucial as approximately one-fifth of the world's daily oil supply and 20% of global LNG transit through this chokepoint.
On February 28, 2026, the US and Israel launched Operation Epic Fury, striking Iran's military and nuclear facilities, which resulted in the death of Supreme Leader Ali Khamenei. Iran's response was to close the Strait of Hormuz within 72 hours.
Iran did not close the strait to everyone. It implemented a selective closure, granting transit clearance to nations like China, Russia, India, Iraq, and Pakistan, and fast-tracking those that expelled US or Israeli ambassadors. This strategy aimed to prevent these key buyers from joining a Western coalition to reopen the strait.
The closure caused Brent crude oil prices to surge past $126 per barrel, and European and Asian LNG prices increased significantly. Fertilizer prices also spiked, threatening agricultural yields, and global supply chains faced cascading disruptions.
India, heavily reliant on oil imports transiting Hormuz, faced rising fuel prices, increased LPG cylinder costs, and higher grocery bills due to fertilizer price hikes. The crisis also put pressure on the Indian rupee, led to capital outflows, and slowed economic growth.
The article outlines three scenarios: managed de-escalation where transit partially resumes, prolonged closure leading to stagflation, and a US-led military reopening which carries a high risk of a global recession.
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