UK Aviation Fuel Squeezed as Hormuz Closure Enters 2nd Month

The month-long closure of the Strait of Hormuz by Iran is creating a severe aviation fuel crunch in the United Kingdom, forcing flight cancellations at London's Heathrow Airport and pushing global Brent crude prices up 60 percent in March alone.

"The genie is out of the bottle," said Neil Quilliam, an associate fellow at the Chatham House think tank, in a Reuters analysis. "Now that Hormuz has been closed, it can be closed again and again, and that poses a major threat to the global economy."

The disruption, which the International Energy Agency calls the world's biggest energy supply shock, has taken more than 12 million barrels per day of regional supply offline. International Brent crude futures hovered near $110 a barrel on Monday, up from around $70 before the conflict began in late February. U.S. West Texas Intermediate crude traded above $111 per barrel.

The crisis threatens to snarl supply chains and fuel inflation globally as the conflict enters its second month. With a U.S. deadline for Iran to reopen the strait expiring on April 7, markets are bracing for further escalation that could see prices climb higher and supply disruptions that industry insiders project could last for months.

A Tale of Two Fortunes

The effective closure of the waterway—a conduit for a fifth of the world's oil—has bifurcated the fortunes of Middle Eastern producers. A Reuters analysis of March export data found that nations with alternative pipeline routes have reaped a financial windfall from the price surge. Iran's estimated oil revenues rose 37 percent year-on-year, while Oman's climbed 26 percent.

Saudi Arabia, which can use its 7 million-barrel-per-day East-West pipeline to bypass Hormuz, saw revenues increase by 4.3 percent despite a 26 percent fall in export volumes. The price surge more than compensated for the lower output.

In stark contrast, producers trapped behind the blockade have lost billions. Iraq's estimated oil export revenue plunged by 76 percent to $1.73 billion, while Kuwait's fell 73 percent to $864 million. Both countries lack the infrastructure to route their crude to international markets by other means.

Diplomatic Deadlock and Market Uncertainty

The conflict's end game remains highly uncertain, contributing to sustained market volatility. The U.S. has threatened to destroy Iranian energy infrastructure if shipping is not restored by Tuesday. Tehran, meanwhile, has rejected a 15-point ceasefire plan and has begun charging for safe passage for vessels from nations it deems friendly, accepting payment in Chinese yuan, according to the Atlantic Council.

Ariel Cohen, a contributor at Forbes, outlined three potential scenarios: a military escalation that drives prices higher and forces supply diversification away from the Gulf; a U.S. withdrawal that cedes regional influence to China and Russia; or a conditional armistice that reopens the strait but leaves a political risk premium baked into oil prices.

While OPEC+ agreed to a modest production increase of 206,000 barrels per day for May, the measure is seen as largely symbolic, as war-related constraints prevent several key members from raising output. For now, the global economy is feeling the impact, with the aviation fuel shortage in Britain serving as a tangible sign of the conflict's expanding economic consequences.

This article is for informational purposes only and does not constitute investment advice.