A prolonged closure of the Strait of Hormuz represents the most significant threat to global energy markets in decades, according to a new Horizons report from Wood Mackenzie, with knock-on effects already reshaping insurance pricing across marine, trade credit and energy lines.
More than 11 million barrels per day of Gulf crude and condensate output is currently curtailed, while over 80 million tonnes per annum (Mtpa) of LNG supply, equivalent to around 20% of global supply, remains inaccessible to global markets.
The report sets out three scenarios — Quick Peace, Summer Settlement and Extended Disruption — each mapping a different timeline for ending the conflict and reopening the Strait, with corresponding effects on supply, prices, demand and the wider economy.
"The Strait of Hormuz is the most critical chokepoint in global energy markets, and a prolonged closure would become far more than an energy crisis," said Peter Martin, head of economics at Wood Mackenzie.
Under Quick Peace, a near-term agreement reopens the Strait by June, with Dated Brent easing to around $80/bbl by end-2026 and $65/bbl in 2027 as the market returns to oversupply. Global GDP growth slows from 3% in 2025 to 2.3% in 2026, with recession confined to the Middle East.
The Summer Settlement scenario assumes negotiations stretch into late summer, with the Strait largely closed until September. Supply shortages persist through Q3 2026, pushing global GDP growth below 2% and triggering a shallow global recession in H2 2026.
Under Extended Disruption, the Strait remains largely closed through end-2026. Brent could approach $200/bbl, while diesel and jet fuel prices could rise towards $300/bbl in major refining centres despite oil demand falling by 6 million b/d year-on-year in H2 2026.
The global economy could contract by as much as 0.4% in 2026 under that scenario, with Middle East GDP shrinking 10.7%, EU27 GDP declining 1.5% in 2026 and 0.5% in 2027, US growth falling below 1% in both years, and China's growth slowing to 3% in 2026.
Wood Mackenzie's modelling lands as Washington's parallel attempt to restore shipping flows has stalled. The US Development Finance Corporation's $40 billion maritime reinsurance facility, backed by Chubb, AIG, Berkshire Hathaway, Travelers, Liberty Mutual and Starr, has written no business since being launched as the mechanism to reopen the Hormuz corridor.
Underwriters have attributed the lack of uptake to the facility being conditioned on US naval escorts that have not been established at scale.
A Lloyd's Market Association survey of marine war market participants found 88% retained appetite to write hull war risks and over 90% continued to offer cargo cover, suggesting commercial insurance capacity was not the binding constraint.
Alan Gelder, senior vice president for refining, chemicals and oil markets at Wood Mackenzie, said accelerated electrification and displaced imports could push Brent around $10/bbl below the Quick Peace path over the medium to long term.
Even under Quick Peace, LNG markets remain tight through summer 2027 as Gulf facilities recover and construction delays slow new supply. Global LNG capacity is still set to expand by around 200 Mtpa by 2031, roughly 50% above current levels.
Under Extended Disruption, some of the Gulf's 85 Mtpa of existing LNG supply could be permanently lost, with around 75 Mtpa under construction facing multi-year delays, leaving global supply roughly 70 Mtpa below pre-conflict expectations.
"Persistent supply uncertainty would accelerate efforts to diversify away from imported LNG, supporting coal resilience and faster growth in renewables and electrification across Asia and Europe," said Massimo Di Odoardo, vice president of gas and LNG research at Wood Mackenzie.
