The World’s Most Critical Oil Chokepoint Just Closed. New Zealand and Australia Are Running on Fumes

On the morning of February 28, the Strait of Hormuz — a strip of water barely 33 kilometres wide at its narrowest point, through which a fifth of all the world’s oil flows every day — reached a state of functional paralysis. Following a coordinated US-Israeli military campaign against Iranian nuclear and military targets, Iran’s Revolutionary Guard threatened to set ablaze any vessel attempting to transit the waterway. Within days, tanker traffic had fallen by roughly 70 to 90 per cent. More than 150 ships sat anchored outside, waiting.

The oil market’s reaction was immediate and historic. Brent crude briefly traded above $100 per barrel, while West Texas Intermediate hovered around $96 — the first time oil had crossed $100 since Russia’s invasion of Ukraine in 2022. CNBC At one point during a frenzied Monday session, Brent futures hit a session high of $119.50 per barrel, while WTI touched $119.48 — on track for the biggest single-day jump in history.

the price of oil has been volatile, Source: Trading Economics

For Neil Atkinson, former head of oil at the International Energy Agency, the moment was without precedent. “We are in a potentially game-changing and unprecedented energy crisis,” he told CNBC. “There is no precedent for this. The sky is the limit.”

A Supply Shock Without Historical Equal

According to historical data from Rapidan Energy Group, the estimated 20% of disrupted supply is roughly twice as large as the record set during the Suez Crisis of 1956–1957. The scale has overwhelmed normal market mechanisms. The war has effectively wiped out spare capacity, because Saudi Arabia and the UAE have been cut off from global oil markets — and spare capacity is the shock absorber of the global energy system. When it disappears, there is no buffer.

Iraq’s three main southern oilfields have seen production fall 70% to 1.3 million barrels per day, down from 4.3 million bpd before the conflict. Kuwait has announced precautionary cuts. Qatar has paused LNG exports. The cascading effects have pushed not just crude prices but natural gas and jet fuel costs sharply higher, amplifying the shock across every energy-dependent sector of the global economy.

The White House, scrambling to contain the political fallout, has weighed a range of emergency measures. US Energy Secretary Chris Wright told Fox News that energy prices will fall once the US military destroys Iran’s capability to strike tankers, predicting the disruption would last “weeks, certainly not months.” The assurances have had limited effect on markets. Analysts at Rapidan noted that traders had assumed for decades no country would be allowed to shut the Strait — the fact that it has happened at all is, in their words, “completely calamitous and unexpected.”

G7 finance ministers convened an emergency meeting, pledging to release petroleum from strategic reserves. Three member countries, including the United States, are already said to support a release of 300–400 million barrels, potentially drawing on roughly 25–30% of the IEA system’s 1.2 billion barrels in public emergency stocks.

New Zealand: Running on Borrowed Time

For New Zealand, the crisis has landed with particular force. AA principal policy adviser Terry Collins told 1News that Kiwi motorists faced “week after week” fuel hikes, with regular 91 petrol expected to break the $3 barrier imminently. Collins noted that every US$1 increase in crude translates to about one cent at the pump. “From the start of the year to now, we should already be expecting about 33 cents of increases — and that hasn’t fully hit yet,” he said.

The structural vulnerability runs deeper than the current price spike. New Zealand’s Marsden Point refinery was converted to an import terminal in 2022, leaving the country with no domestic backstop. Fuel arrives by tanker from Singapore, South Korea, and the Middle East — supply chains that, as the University of Auckland’s Dr Dulani Jayasuriya has written, are exquisitely efficient in a world of open sea lanes, and acutely exposed when the lanes aren’t open.

New Zealand does hold International Energy Agency ‘oil tickets’ — paper commitments from the US, UK and Japan to supply emergency barrels in a crisis. But as Jayasuriya notes, paper tickets are a long way from a tanker full of oil. If the strait stays closed and those countries are simultaneously stressed, the tickets are worth considerably less than they appear.

Australia: 36 Days and Counting

Australia’s situation is only marginally better. At the start of 2026, Australia held an estimated 36 days of petrol, 34 days of diesel, and 32 days of jet fuel — the largest stockpile in 15 years, but still well short of the 90-day minimum required by the IEA, a standard the country has failed to meet since 2012. Australia imports roughly 90% of its liquid fuel, meaning global crude prices flow directly and immediately to the pump. Analysts say petrol could jump around 40 cents per litre — roughly $24 extra to fill a standard 60-litre tank.

The Maritime Union of Australia has been blunt about the systemic failure on display. “The closure of the Strait of Hormuz is a stark warning of the volatility of Australia’s access to global fuel supply chains,” said MUA National Secretary Jake Field. “We mustn’t gamble our economic stability on uninterrupted access to foreign fuel markets.”

The deeper problem, as the Australian Strategic Policy Institute has outlined, is that Australia’s fuel security depends on a chain of maritime chokepoints stretching from the Persian Gulf to the Indonesian archipelago — and disruption at any point along that chain reduces the country’s margin for error. Hormuz is only the first link to break. If disruption were to extend into Southeast Asian sea lanes, the strategic test would be one no amount of last-minute rationing could easily solve.

Markets, Macro, and the Long Reckoning

The oil shock is rippling far beyond the petrol pump. Former Treasury Secretary Janet Yellen warned the conflict could hit US economic growth and fuel inflationary pressures, holding the Federal Reserve back from cutting rates. “The recent Iran situation puts the Fed even more on hold,” she said. For central banks already navigating the intersection of sticky inflation and slowing growth, an oil shock of this magnitude represents a genuinely unwelcome complication.

The commodity volatility is also reshaping investment behaviour globally. As Brave New Coin has documented in its coverage of safe-haven commodity markets, investors seeking inflation protection have been rotating into physical assets — a trend that energy price shocks historically accelerate. Separately, BraveNewCoin’s analysis of the global stablecoin ecosystem notes that persistent inflation and macro instability have become key drivers accelerating digital dollar adoption as an alternative financial instrument.

Qatar’s energy minister Saad al-Kaabi put the stakes plainly: “Everybody’s energy price is going to go higher. There will be shortages of some products and there will be a chain reaction of factories that can’t supply.” He warned oil could reach US$150 a barrel if the closure persists.

For Australia and New Zealand, the current crisis is not primarily a price story. It is a sovereignty story — the consequence of two decades of decisions that prioritised efficiency over resilience, and imported fuel over domestic capacity. The refineries are gone. The reserves are thin. The tankers are anchored. And neither government has yet published a public drawdown scenario for Day 30.