FOR months, optimism about the Middle East Gulf crisis rested on a familiar assumption: when the shooting stops, ships return, energy flows resume and markets normalise.

The latest Reuters poll of economists suggests that confidence is fading. Most MEG economies are now expected to contract more sharply in 2026 than forecast just three months ago, before recovering next year. The reassessment reflects a reality shipping markets have already absorbed: this is not a disruption that ends with a ceasefire.

Higher oil prices have supported government revenues, but they have not offset lost export volumes, soaring freight costs and weaker investor confidence.

Lloyd’s List has argued throughout the crisis that restoring confidence would take far longer than ending hostilities. Even during recent lulls in fighting, vessel traffic through the Strait of Hormuz recovered to only a fraction of normal levels. Shipowners, charterers and insurers are unlikely to resume routine operations until they believe stability is durable rather than temporary.

The risks are also broadening. Iran has reportedly instructed Yemen’s Houthis to prepare renewed attacks on Red Sea shipping should the US strike Iranian power infrastructure. At the same time, military operations are increasingly targeting strategic assets across the MEG, raising concerns over the security of energy infrastructure itself.

Most significant, however, is Tehran’s threat against the gulf’s alternative export routes. By warning that the UAE’s Fujairah pipeline and Saudi Arabia’s East-West Pipeline could become targets if pressure on Iranian exports continues, Iran is challenging the very systems designed to reduce dependence on the SOH.

The threat here is simple: either everyone exports energy, or no one does.

A prolonged closure of Hormuz remains unlikely. Neither Tehran nor Washington has much to gain from permanently shutting the world’s most important oil transit route. But stability should not be confused with the absence of catastrophe.

The more plausible outlook is one of recurring disruption: periodic escalations, intermittent supply interruptions and repeated oil-price shocks punctuated by uneasy returns to diplomacy. Under that scenario, SOH traffic remains below pre-war levels, oil prices stay elevated and investment in alternative transport routes accelerates.

Yet the crisis has also exposed an unexpected resilience. Alternative supply routes, contingency planning and adaptive trading patterns have prevented the worst-case outcomes many once feared. The energy transition has slowed oil demand growth, while global supply capacity has expanded, leaving the market better placed to absorb shocks.

That does not mean the risks are trivial. Even a partial, prolonged disruption could keep oil prices above $80 per barrel for several quarters, weighing on growth and inflation. The ultimate impact will depend on how much traffic returns to the strait, how aggressively other producers increase output and whether Chinese demand rebounds.

The same economists warning of a gulf contraction also have a more extreme scenario on their desks — one where sustained closure of Hormuz pushes the oil price up to around $130pb and world GDP growth below 2% next year.

Hormuz is unlikely to disappear from global energy markets. But every month of disruption makes it slightly less indispensable — and that gradual erosion of strategic importance may prove the conflict’s most lasting legacy.

Richard Meade
Editor-in-chief, Lloyd’s List 

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