Oil at Risk: How the Strait of Hormuz Moves Global Markets

So I’m sure you’ve been hearing about the US–Israel and Iran war lately. When countries go to war, the markets do what they do best: overreact and start affecting the price of everything, from oil and gas to the interest rates you’ll be paying on future student loans.

It’s no different from when the Russia–Ukraine war broke out. The only difference is that, instead of pipelines and Black Sea ports, the focus is now on a narrow strip of water called the Strait of Hormuz. In both cases, the result is sharply rising energy prices (crude oil jumped from $72 to $111 at the time of writing) and higher food prices, while central banks weigh their options on interest rates.

So, what exactly is the Strait of Hormuz, and why is it so important?

The Strait is a narrow stretch of water between Iran and Oman that connects the Persian Gulf to the open ocean. It’s only about 40 km wide at its narrowest point, yet it carries around one-fifth of the world’s traded oil and a significant share of LNG (liquefied natural gas). It serves as the main exit route for crude and gas exports from major OPEC countries such as the UAE, Iran, Saudi Arabia, Kuwait, Iraq, and Qatar.

Asian markets are arguably the most affected. The KOSPI (Korean Stock Exchange) experienced one of its steepest single-day declines in early March 2026. This is largely because Asia depends heavily on Middle Eastern energy, importing around 60% of its crude oil from the region, as well as 84% of the oil and 83% of the LNG that pass through the Strait of Hormuz.

As oil prices surge, these economies face worsening trade balances and currency depreciation.

Strait of Hormuz showing confined shipping lanes (Wikimedia Commons)

Right, so the war affects economies — but how does that make you worse off?

Well, it directly increases your day-to-day cost of living. Higher oil and gas prices mean more expensive transportation, electricity, and heating, which then feeds into the price of almost everything you buy — most importantly, food. Fertiliser and shipping costs also rise, making imported food more expensive.

If this energy-driven inflation stays high, central banks may delay cutting interest rates or even raise them further. This keeps borrowing costs higher for longer. In practical terms, that means it becomes more expensive to get a mortgage, finance a car, manage credit card debt, or repay student loans in the future. It doesn’t seem like such a distant problem anymore, does it?

Lastly, the job market is also likely to be affected. Higher energy costs combined with higher interest rates tend to slow economic growth and squeeze company profits. This slower growth leads to weaker hiring, pressure on wages, and more volatile markets — just as you may be starting to invest or look for internships.

The war doesn’t just move charts on Bloomberg; it quietly shows up in your grocery bill, the interest rate on your future debt, and how easy it will be to land a well-paid job after graduation.

Since inflation is likely to rise and make everything more expensive, is there any way a student can help their investments grow to keep up?

Actually, yes — but take the following with a pinch of salt (this is not financial advice, and it’s mentioned to avoid you risking your savings). During times of war, certain asset classes tend to perform more favourably, or at least help preserve value:

1. Defensive bets (short-term or for diversification):

a. High-quality government bonds (e.g. US Treasuries): Debt issued by strong governments is often seen as a “safe asset.” When uncertainty rises, money tends to flow into these bonds, pushing prices up and yields down, partly offsetting losses elsewhere. They may also benefit if central banks eventually cut rates to support growth. However, over longer periods, their real returns can be eroded by inflation and increased borrowing.

2. Classic wartime/inflation hedges (hold):

a. Gold and other precious metals: Gold has no default risk and isn’t tied to any single country’s currency. During periods of war, investors are concerned about inflation, so gold is often treated as a store of value, increasing demand.

b. Commodities and energy exposure: Wars in key producing regions disrupt oil, gas, and raw materials. Lower or riskier supply, combined with steady demand, pushes prices up. This increases revenue and margins for commodity and energy producers.

3. Equities that tend to hold up better:

a. Defensive sectors (consumer staples, healthcare, and utilities): These sectors perform relatively well regardless of the economic cycle, as they provide essential goods and services. Their earnings are more stable when growth slows, and their share prices tend to be less volatile than the broader market.

b. Defence and aerospace: These sectors can see higher demand as governments increase spending during conflicts, creating more predictable orders for defence and aerospace firms.

Conclusion

The Strait of Hormuz is just 40 km wide, but its ripple effects can reach your grocery store, your bank statement, and your job prospects. What happens in the Persian Gulf doesn’t stay there — it travels through energy markets, into inflation figures, and eventually into the everyday financial decisions you will be making as a young adult.

The uncomfortable truth is that geopolitical risk is now a permanent feature of personal finance, not just something traders worry about on Bloomberg. The good news is that understanding how these shocks move through the system already puts you ahead of most people your age.

While no investment strategy is foolproof, knowing which asset classes historically hold up under pressure — whether that’s gold, commodities, or defensive equities — gives you a framework to think clearly when markets panic.

You don’t need to time wars or predict the next event. You just need to understand the mechanics well enough to avoid making impulsive financial decisions when headlines become overwhelming.

Because in a world where a narrow strip of water can send fuel prices soaring and central banks scrambling, financial literacy isn’t just useful — it’s a survival skill.

References

Axios. (2026, March 27). Borrowing costs are surging amid Iran war. https://www.axios.com/2026/03/27/iran war-treasury-inflation-rate-cuts

Bloomberg. (2026, March 30). Why the Strait of Hormuz closure is an Asian crisis. https://www.bloomberg.com/opinion/articles/2026-03-30/why-the-strait-of-hormuz- closure-is-an-asian-crisis

CNBC. (2026, March 3). The Strait of Hormuz is facing a blockade. These countries will be most impacted.

CNBC. (2026, March 4). Middle East conflict poses fresh test to central banks as oil shock fuels inflation.

CNN. (2026, March 5). How the Middle East war could hurt the global economy.

Goldman Sachs. (2024, June 25). Which commodities are the best hedge for inflation?https://www.goldmansachs.com/insights/articles/which-commodities-are-the- best-hedge-for inflation

International Energy Forum. (2021, November 9). High natural gas prices contribute to rising fertilizer and food prices.

Kiel Institute for the World Economy. (2026, March 23). Strait of Hormuz closure triggers global supply shock with disproportionate food security impacts. https://www.ifw-kiel.de/publications/news/strait-of-hormuz-closure-triggers-global- supply-shock-with-disproportionate-food-security-impacts

Mesirow. (2023). The most effective portfolio inflation hedges: Implications for asset allocation. https://www.mesirow.com/fiduciary-solutions/Inflation-hedge

Reuters. (2026, January 23). What is the Strait of Hormuz and why is it so important for oil?

SmartAsset. (2026, March 19). How to protect your money during war: Investment types and strategies.

S&P Global. (2022, January 18). High natural gas prices could lead to spike in food costs through fertilizer.

UNCTAD. (2026, March). Strait of Hormuz disruptions: Implications for global trade and development. https://unctad.org/publication/strait-hormuz-disruptions-implications-global-trade-and-development

U.S. Energy Information Administration. (2026a, March 30). Amid regional conflict, the

Strait of Hormuz remains critical oil chokepoint. https://www.eia.gov/todayinenergy/detail.php?id=65504

U.S. Energy Information Administration. (2026b, March 30). The Strait of Hormuz is the world’s most important oil transit chokepoint. https://www.eia.gov/todayinenergy/detail.php?id=61002

U.S. News & World Report. (2026, January 14). 6 ETFs to buy when geopolitical tensions rise.

VanEck. (2026, March 15). How to invest during geopolitical shocks. https://www.vaneck.com.au/blog/investing/positioning-portfolios-for-conflict/

Zero Carbon Analytics. (2026, February). Asian countries most at risk from oil and gas supply disruptions in the Strait of Hormuz. https://zerocarbon-analytics.org/insights/briefings/asian-countries-most-at-risk-from-oil and-gas-supply-disruptions-in-strait-of-hormuz