Australia exports vast quantities of energy but remains structurally dependent on imported liquid fuels. That paradox became uncomfortably visible in March 2026 when geopolitical conflict in the Middle East began reshaping the world's energy infrastructure in real time.
The Strait of Hormuz has experienced ongoing disruption since 28 February 2026, following joint military strikes by the United States and Israel on Iran, which included the killing of Iran's supreme leader Ali Khamenei. In response, Iran launched retaliatory missile and drone attacks on US military bases, Israeli territory, and other Gulf states, while its Islamic Revolutionary Guard Corps (IRGC) issued warnings prohibiting vessel passage through the strait, leading to an effective halt in shipping traffic.
This disruption affected about 20% of the world's daily oil supply and significant volumes of liquefied natural gas (LNG), prompting major shipping firms to suspend operations in the area. The response was not a traditional blockade but something subtler and more economically devastating. Insurance costs for ships transiting the waterway became prohibitively expensive, and both operators and underwriters withdrew from the corridor. Iran didn't use underwater mines or have to rely on anti-ship missiles, but focused on selectively deploying a much cheaper technology. All Iran had to do was several drone strikes in the vicinity of the Strait of Hormuz, and all of a sudden, insurers and shipping companies decided that it was unsafe to traverse that very narrow S-curve of that waterway.
Brent crude oil prices surpassed US$100 per barrel on 8 March 2026 for the first time in four years, rising to US$126 per barrel at its peak. The closure of the strait has been described as the largest disruption to the energy supply since the 1970s energy crisis, as well as the largest in the history of the global oil market.
The immediate response involved searching for alternative routes. Pakistan officially requested that Saudi Arabia reroute oil supplies through port of Yanbu on the Red Sea, with Saudi Arabia providing assurances and arranging at least one crude shipment to bypass the closed strait. Saudi authorities also diverted some of their own crude exports via Yanbu to reduce the impact. Yet these workarounds reveal infrastructure gaps. Rerouting will not help because alternative pipeline routes that bypass the Strait of Hormuz in Saudi Arabia and Iraq provide only 3.5–5.5 million barrels per day of spare capacity. Against normal flows of 20 million barrels daily through the strait, alternatives fall catastrophically short.
The human consequences rippled across industries. Iraq, the world's sixth-largest oil producer, has had to cut production of oil in the oil-rich region of Basra by 70 percent, from 3.3 million barrels per day to 900,000 barrels per day, as the majority of its exports pass through the strait. A number of energy companies, including Qatar Energy, Shell, Kuwait Petroleum Corporation, and Bapco invoked force majeure across GCC countries. This is unprecedented in the history of oil and gas production in the Gulf region. The Gulf region is also a producer of urea and ammonia, with about one-third of the world's fertiliser passing through the strait; urea prices increased by 50% as of 27 March.
Asia bore the heaviest burden. About 80% of oil and oil products transiting the Strait in 2025 was destined for Asia, with China, India and Japan being the main importers in the region. China receives between 45% and 50% of its imports through the strait. Qatar and the United Arab Emirates account for 99% of Pakistan's LNG imports, 72% of Bangladesh's and 53% of India's. For Australia, the crisis was neither distant nor theoretical.
Recent events in the Middle East have turned the fuel vulnerability Australia confronted during the Red Sea disruptions last year into an immediate strategic test. Following US and Israeli strikes on Iran, Tehran has claimed that the Strait of Hormuz is closed and warned that ships attempting to transit the waterway risk attack. The narrow channel between Iran and Oman normally carries around one fifth of global oil and gas supply, making it one of the most important energy chokepoints in the world. But the geographic layer of concern cuts deeper. Even if Middle Eastern crude can eventually be rerouted or sourced elsewhere, the refined fuel Australia imports must still pass through the narrow maritime channels of Southeast Asia before reaching Australian ports. These Indonesian straits (Malacca, Lombok and Sunda) carry the majority of Australia's trade, with roughly 83 percent of maritime imports and around 90 percent of exports moving through these routes.
This exposes a structural vulnerability rarely articulated in Australian defence and energy policy debate. Australia's fuel security depends on a chain of maritime chokepoints stretching from the Persian Gulf to the Indonesian archipelago. Disruption at any point along that chain reduces Australia's margin for error. The immediate crisis in the Strait of Hormuz was only the first visible break in that chain.
Global policymakers explored responses. The International Energy Agency triggered the largest emergency reserve deployment in its history, with plans to release 400 million barrels from member nation reserves. As part of this coordinated response, the United States committed to releasing 172 million barrels beginning the week of March 12, 2026. Yet the core challenge lies in matching both the volume and sustained flow rates that the Strait of Hormuz provides to global markets.
The longer-term question for Australia concerns not whether prices will eventually stabilise, but what structural changes this crisis demands. Rather than treating fuel security purely as a stockpiling problem, Australia should think about distributed fuel resilience. That includes larger northern storage facilities, greater redundancy in import terminals and expanded capacity to move fuel across the continent during disruption. It also means accelerating diversification through alternative fuels, synthetic fuels and defence-grade energy systems that reduce reliance on imported petroleum over time. Such investments would strengthen both economic resilience and military readiness.
For now, the world's energy markets remain in crisis. An extended conflict in Iran that locks up the Strait of Hormuz could keep oil prices above $100 barrel, driving up gasoline and other energy prices. Until we see a meaningful resumption of oil flows through the Strait of Hormuz, upward pressure on fuel prices is likely to persist. What Australian observers often miss about global energy security is this: when chokepoints close, the mathematics become unforgiving. There is no negotiating with geography.