Oil rises, trade risks grow as Hormuz tensions build

MUSCAT: Rising oil prices linked to tensions around the Strait of Hormuz may provide only temporary revenue relief, while the bigger economic risk for businesses lies in higher shipping and insurance costs and potential supply-chain disruption, Omani economist Dr Nasser Al-Maawali said.
Speaking at a recent Ramadhan evening gathering organised by the Oman Chamber of Commerce and Industry (OCCI), Al-Maawali questioned the idea of “gains” from conflict, arguing that any upside from higher crude prices can be outweighed by the knock-on costs carried by trade and logistics.
“Any disruption in the Strait of Hormuz inevitably affects global oil and gas supplies,” he said, describing the waterway as a critical pressure point for energy flows and wider commerce.
Oil markets have reacted quickly. The official selling price of Oman crude for May delivery climbed over three sessions to $85.93 a barrel on March 4, up from $82.09 on March 3 and $80.40 on March 2.
But Al-Maawali stressed that the wider impact “is not only in oil prices”. “The larger risks lie in disruptions to supply chains, rising shipping costs and higher insurance premiums,” he said.
The Strait of Hormuz is one of the world’s most important energy chokepoints. In 2024, oil flows through the strait averaged about 20 million barrels per day, roughly one-fifth of global petroleum liquids consumption, according to the US Energy Information Administration (EIA). The EIA also estimates that about 20% of global LNG trade transited the strait in 2024, largely from Qatar.
Shipping and insurance markets have begun repricing risk. Reuters reported that some marine insurers have cancelled certain war-risk cover, a move expected to lift operating costs for tankers and other vessels trading in the Gulf.
For Oman’s business community, the effect is likely to be felt first in the mechanics of trade: tighter insurance requirements, repriced freight contracts, longer lead times, and higher “landed costs” for imported inputs. That can translate into elevated working-capital needs for importers, wholesalers and manufacturers, and into more cautious procurement decisions until shipping routes and premiums stabilise.
Al-Maawali also warned that prolonged instability can increase investor caution toward the region, potentially raising the risk premium applied to new projects—even if energy exporters benefit from higher crude prices in the near term.