The blockage of the Strait of Hormuz as a result of the conflict between the United States and Iran has, within a few weeks, evolved from a mere price shock into a real supply crisis. Large parts of Asia are already experiencing fuel shortages, while governments are preparing airlines for possible rationing and initial hoarding has begun. Countries particularly affected include Australia, India, the Philippines, and South Korea. In Australia, hundreds of gas stations have reported shortages, while India—due to its heavy reliance on imports from the Middle East—has activated alternative fuels and is already facing supply issues with cooking gas. In the Philippines, a national energy emergency has even been declared, as diesel and gasoline prices have more than doubled since the start of the war and fuel rationing for air traffic is looming.
The consequences are increasingly being felt beyond Asia. In Egypt, the government has ordered shorter business hours and restrictions on lighting to conserve energy. At the same time, major energy companies warn that supply disruptions are likely to spread to Europe in the coming weeks. Despite recently declining oil prices, the situation remains tense, as even a rapid reopening of the key shipping route would take weeks or months to restore normal supply flows. Meanwhile, demand for alternative sources is rising as countries attempt to secure their reserves.
The economic impact is already extending beyond the energy sector. Leading indicators such as purchasing managers’ indices point to a slowdown in economic activity in both the United States and Europe, along with the first decline in employment in the U.S. in over a year. Rising energy costs are not primarily driving inflation but are instead crowding out consumption and investment in other areas, placing particular strain on the labor market. At the same time, uncertainty is strengthening the U.S. dollar while other currencies come under pressure. Overall, the energy shock threatens to dampen global demand and further weaken the economic recovery, with consequences likely to intensify the longer the crisis persists.