The Strait of Hormuz is the single most important chokepoint in the oil market, and the price of crude has always carried some premium for the risk that flows through it could be interrupted. In 2026 that risk stopped being theoretical: after the US-Israel war with Iran began on February 28, tanker traffic through the strait collapsed and the "Hormuz risk premium" became the main driver of oil prices, including WTI. This explainer covers how the premium works and how it showed up in prices.
Why Hormuz Matters
According to the U.S. Energy Information Administration, about 20 million barrels per day of crude oil, condensate and petroleum products moved through the strait in 2024 — roughly 20% of global petroleum liquids consumption. Saudi Arabia, Iraq, the UAE, Kuwait, Qatar and Iran all ship most of their exports through it. At its narrowest point the strait is about 21 miles wide, and the inbound and outbound shipping lanes are only about two miles wide each.
Only Saudi Arabia and the UAE have pipelines that can bypass the strait: Saudi Aramco's East-West pipeline to the Red Sea and the UAE's Abu Dhabi Crude Oil Pipeline to Fujairah. Before the 2026 crisis the EIA estimated that only about 2.6 million b/d of unused bypass capacity would be available in a disruption. During the crisis Aramco said it had raised the East-West line's capacity to 7 million b/d — still far short of normal Hormuz flows.
What a Risk Premium Is
A risk premium is the part of the oil price that reflects the probability-weighted cost of a supply disruption rather than current supply and demand. Nobody can measure it directly; analysts infer it from how prices react to news, from options markets (higher implied volatility and more expensive upside calls) and from the gap between waterborne crude such as Brent and inland crude such as WTI. When the risk is only a threat, the premium is typically a few dollars a barrel. When the disruption actually happens, the "premium" becomes a real shortage and prices are set by who can still get barrels.
How It Played Out in 2026
Before the war, forecasters expected an oversupplied market: the EIA's February 2026 outlook projected Brent averaging about $58 a barrel in 2026 (see our note on the pre-war outlook). In late February WTI traded around $67. Once fighting began and traffic through the strait collapsed, prices repriced violently:
- Week to March 6: WTI rose more than 35% to about $90.90, its biggest weekly gain since futures trading began in 1983.
- March 9: April WTI futures traded from about $119 down to $81 in a single session, a record $38 intraday range (details).
- March 20: Brent's premium over WTI topped $15 a barrel, the widest since 2012, as waterborne supply was hit hardest.
- April 8: a US-Iran ceasefire produced the largest one-day drop in oil prices since April 2020.
- Late April: Brent touched about $126, a four-year high, on blockade headlines.
The IEA called the closure the largest supply disruption in the history of the oil market, and its members agreed a record 400-million-barrel emergency stock release. Saudi Aramco estimated that more than 1 billion barrels of supply had been lost by mid-May (our May report).
Why WTI Reacts Differently From Brent
WTI is priced at Cushing, Oklahoma, and backed by US production that the conflict did not touch, so it rose less than Brent at most points of the crisis. US crude did benefit from export demand, as buyers in Asia and Europe sought replacement barrels, which kept the spread from widening without limit. The WTI-Brent spread guide explains these mechanics.
Where Things Stand
As of early October 2026 the strait had partly reopened but flows remained below normal: Middle East crude exports recovered to nearly 13 million b/d in September, with Hormuz shipments tracking around 7.5 million b/d, according to market reports. The EIA's September 2026 outlook expected some export constraints to persist through the end of the year. Front-month WTI settled at $91.11 and Brent at $102.25 on October 2, 2026 — a Brent premium of about $11, still far wider than the $3–5 that was typical before the war. For live prices, see the WTI live chart.
Historical Precedents
The strait was never fully closed during the 1980–88 Iran-Iraq war, although hundreds of ships were attacked in the "Tanker War." In 2019, attacks on tankers in the Gulf of Oman and the September drone strike on Saudi Arabia's Abqaiq facility produced sharp but short-lived price spikes. The 2026 crisis was the first time flows through Hormuz were cut by most of their volume for months.
Sources
- EIA — The Strait of Hormuz is the world's most important oil transit chokepoint
- EIA — World oil transit chokepoints
- IEA — Strait of Hormuz
- CME Group OpenMarkets — What history reveals about today's crude oil volatility
- EIA — Short-Term Energy Outlook (September 2026)
- Wikipedia — 2026–2028 world oil market chronology