The Strait of Hormuz Closure: How a Months-Long Blockade Reshaped Global Energy Markets

Refinery Profit Margins: A Strange Windfall That Proved Short-Lived

The crisis produced a temporary and largely unexpected windfall for some refiners, followed by intense margin pressure. The U.S. 3-2-1 crack spread—the key proxy for refinery profitability—surged to above $60/bbl, the highest level on record, driven by tight product supply relative to crude availability . Goldman Sachs forecast that tighter petroleum product supply would keep refining margins significantly higher throughout 2026, with diesel margins especially elevated, at between $19 and $26 per barrel higher than they would otherwise be .

However, once the Strait of Hormuz began to partially reopen in late June and July 2026, the windfall proved short-lived. The benchmark U.S. 3-2-1 crack spread began declining as crude flows returned faster than product market rebalancing . A compounding factor kept pressure on: Russia's ban on diesel exports due to Ukrainian drone attacks on its refineries kept global product supply tight, bolstering gasoline, diesel, and jet fuel prices even as crude prices calmed .

U.S. Gasoline Prices: $3.70/gal and Climbing

The EIA's August 2026 Short-Term Energy Outlook projected Brent crude averaging $96/bbl for the full year 2026, with U.S. retail gasoline averaging $3.70/gal—a nearly 20% increase from $3.10 in 2025 . Brent crude had peaked at an average of $103/bbl in March 2026, driving gasoline prices higher throughout the second quarter . The EIA noted that uncertainty around reopening the strait kept crude prices volatile and elevated through most of Q2 2026, with an average daily price swing of $4/b in Brent, compared with $1/b in the same months of 2025 . The EIA forecast Brent falling below $90/bbl in Q4 2026, but the damage to consumers' wallets was already done.

Airline Fuel Costs and Operational Disruptions: The Hardest-Hit Industry

The airline industry was hit disproportionately hard because jet fuel supply was doubly constrained: crude feedstock was scarce, and Middle East refineries that produce jet fuel were directly damaged. U.S. airline fuel costs surged 78% in April 2026 alone (to nearly $6.5 billion), following a 26% jump in March, according to U.S. Department of Transportation data. The cost per gallon rose by $1.81 year-on-year to $4.11/gal . Jet fuel crack spreads exceeded $100/bbl—an unprecedented level—as regional refinery operations were disrupted . Fuel typically accounts for 30–35% of airline operating costs, meaning the price shock translated almost immediately into higher fares, capacity cuts, or margin erosion .

IATA warned that jet fuel supply would take months to recover even after the strait reopened, because refineries in the Middle East suffered direct damage, not just feedstock loss. IATA's June 2026 report flagged that the closure had "clobbered" the global airline industry . A Bloomberg analysis of the jet fuel crisis found that several major aviation markets—whose jet fuel imports exceeded 40% of demand—faced acute vulnerability, with some markets at risk of running out of jet fuel within eight weeks . IATA's semiannual report cut its 2026 net profit projection for the sector to a combined $23 billion, well below a previous projection of about $41 billion and down from $45 billion in 2025 .

Jet Fuel Supply Deficits: A Structural Gap Worsened by Refinery Damage

IATA analysis identified a structural jet fuel deficit globally, worsened by the fact that four EU refineries had already closed in 2025 (removing ~400,000 b/d of capacity) before the Hormuz crisis began . Middle Eastern refined-product exports were expected to require another three to four months to recover as refineries returned to service, meaning jet fuel deficits persisted well into Q3 2026 . Allianz Research noted that jet-fuel prices had doubled since the start of the conflict, and even with a cease-fire, regional refining capacity damage meant tight supply would linger . The American Action Forum reported that U.S. Gulf Coast jet fuel spot prices rose by 110% year-over-year by mid-May 2026, and that U.S. refiners had adjusted their processes to maximize jet fuel production at the expense of gasoline .

U.S. Crude Imports from Saudi Arabia: Strangled from Both Sides

The Strait of Hormuz closure cut off the primary route for Saudi crude exports to the U.S. and Asia. Saudi Arabia attempted to reroute exports via its Red Sea terminals on the west coast, but Yemen's Iran-backed Houthi militia declared an embargo on Saudi exports and attacked tankers using that alternative route . By late July 2026, attacks on tankers and energy assets had severely complicated shipments from Saudi Arabia's west coast, meaning that Saudi crude exports—including those destined for the U.S.—were effectively strangled from both sides . The Baker Institute estimated that in normal times, the strait channels about 15 million b/d of crude and 5 million b/d of refined products, representing ~20% of global oil exports. The loss of this flow forced Saudi Arabia into an unprecedented export crisis .

The IMF's Assessment: Global Growth Slashed

The IMF tracked this crisis through three successive assessments. In April 2026, it cut its global GDP growth "reference forecast" to 3.1% (from 3.3% in January), assuming a short-lived conflict and moderate 19% increase in energy prices . Under an "adverse scenario" of prolonged disruption, global growth would fall to 2.5%, pushing the world economy to the brink of recession . The IMF warned that the global economic outlook had "abruptly darkened," with the Strait of Hormuz closure raising the risk of an "energy crisis on an unprecedented scale" . Headline inflation was forecast to rise to 4.4% in 2026, a sharp deviation from the disinflation trend .

By July 2026, the IMF further cut global growth to 3.0% for 2026, describing a "V-shaped recovery"—a weak 2026 followed by a rebound to 3.4% in 2027 . The Middle East growth forecast was slashed to 0.7% for 2026, a 1.2 percentage point downgrade from April, driven entirely by the Hormuz closure's fallout on regional energy exports . The IMF noted that the global economy had "weathered the shock so far" but warned that persistent disruptions would keep inflation elevated and growth weak .

The Broader Picture

The Strait of Hormuz closure has proven to be the largest energy supply shock in history—not merely a repeat of the 1973 oil embargo, but a more complex crisis in which the refining bottleneck became as critical as the crude supply loss. The central constraint shifted from "can we get the crude?" to "can we process what we have into the fuels the world needs?" The IEA described cumulative supply losses exceeding 1 billion barrels by mid-2026 , and even with a partial reopening in late June, the damage to refining infrastructure meant that product markets—especially for jet fuel and diesel—remained in deficit through the second half of the year. For consumers, businesses, and entire economies, the months-long closure of this narrow waterway between Iran and Oman has been nothing short of transformative.