Global markets are under pressure as Iran’s effective blockade of the Strait of Hormuz, a narrow corridor handling around 20% of global oil and a large share of LNG, disrupts energy flows and drives a sharp repricing in risk assets. Brent crude is holding above US$100 per barrel as attacks on regional infrastructure and tanker routes constrain supply. The impact is already feeding through to inflation expectations, with bond yields pushing higher as markets reassess the timing (and likelihood) of rate cuts.
The escalation follows more than three weeks of conflict between Iran and US-Israel forces, with reported casualties exceeding 4,000. Iran has moved beyond conventional strikes, leveraging asymmetric tactics across the strait, including sea mines, missiles, fast boats and drone warfare. The disruption is not just physical. Shipping insurance premiums have surged, vessels are being rerouted, and delays are compounding supply chain pressures, embedding a broader risk premium into global energy markets.
Donald Trump is now intensifying pressure on allies to help reopen the strait, arguing that a coordinated naval response is a “simple” solution to stabilise oil markets. He has criticised Australia and other NATO partners for failing to act, despite benefiting from global energy stability, and has even called on China to contribute given its reliance on Middle Eastern oil imports. The push reflects growing US frustration as economic consequences spread globally.
Australia’s stance reflects a more cautious balance. Anthony Albanese initially backed the US-Israel campaign and confirmed Australian-linked assets in the region, including Al Minhad airbase, have been struck. However, beyond limited defensive deployments, Australia has ruled out escalation and is now pushing for de-escalation, arguing key military objectives have been achieved.
The International Energy Agency has warned this could become the worst oil disruption in decades, urging demand-side responses like reduced travel and remote work. The longer Hormuz remains constrained, the greater the risk of a global recession, and more importantly, the clearer it becomes that control of the strait gives Iran a persistent lever over global inflation and growth.
