The chokepoint

Here's the basic setup. Roughly 20 million barrels of oil per day — about a fifth of global seaborne crude — moves through the Strait of Hormuz, a waterway that is, at its narrowest, 21 miles wide.^[1] Two shipping lanes, each two miles across, separated by a two-mile buffer zone. That's the entire infrastructure. Decades of Asian industrialization, motorization, and power generation funneled through a gap you could see across on a clear day.

As of this week, no ships are moving through it.^[2]

Iran didn't need to physically blockade the strait, though it certainly threatened to. What actually stopped the tankers was something more mundane and, in a way, more elegant: insurance companies pulled war risk coverage.^[4] Gard, Skuld, NorthStandard, the London P&I Club, the American Club — all announced cancellations effective March 5. War risk premiums had already spiked from 0.2 percent to 1 percent of hull value in 48 hours. For a $100 million VLCC, that's a jump from $200,000 to $1 million per voyage. At some point the math stops working, and shipowners do what they always do when the math stops working: they stop.

So the strait isn't "closed" in a military sense. It's closed in an actuarial sense. Which, for the purposes of getting oil from point A to point B, amounts to the same thing.

The plumbing

The question everybody keeps asking is "how bad is this for Asia?" The honest answer is: it depends on which Asia you mean, because the plumbing is different for each country, and the plumbing is everything.

Let me walk through the three that matter most.

India

~5.0 Mb/d total imports

Top: Iraq, Saudi Arabia, UAE

Japan

~2.3 Mb/d total imports

Top: Saudi Arabia, UAE, Kuwait

China

~11.1 Mb/d total imports

Top: Saudi Arabia, Iran, Iraq

Hormuz-transitingOther routes

Source: EIA World Oil Transit Chokepoints; S&P Global (2024–25)

India: the worst seat at the table

India imports roughly 88 percent of its crude oil. As of January, about 55 percent of that — approximately 2.74 million barrels per day — was coming from the Middle East via the Strait of Hormuz.^[6] That's the highest share since 2022. And here's the part that would be funny if it weren't so expensive: India had been reducing its intake of Russian crude over recent months, replacing it with Gulf barrels. In January, Russian imports were down to 1.16 million barrels per day from an average of 1.71 million in 2025.^[5]

The logic ladder goes something like this:

1. India gets sanctioned-country oil from Russia at a discount.
2. Diplomatic pressure and tightening secondary sanctions make Russian crude slightly less convenient.
3. India pivots back toward the Middle East, its traditional supplier.
4. The Middle East catches fire.
5. India is now more exposed to the strait than it has been in four years.

Of course.

India's strategic petroleum reserve holds about 100 million barrels — enough for 40 to 45 days of demand if you include commercial stocks.^[12] The official government line is "9.5 days" if you count only the SPR proper, or "74 days" if you include private-sector and joint stockpiles. The real number — actual barrels in actual tanks — is probably somewhere around 20 to 25 days of net imports. Which number you believe matters quite a bit if the strait stays closed past March.

The rupee is doing what the rupee does when India's import bill spikes: falling. The current account deficit widens mechanically, because India pays for oil in dollars and receives most of its export revenue in... not dollars. Every $10 increase in Brent adds roughly $15 billion to India's annual oil import bill. Brent is up 10 percent in a week. Fine.

Japan: the structural trap

Japan doesn't import oil from Iran — it stopped in 2019 after the U.S. reimposed sanctions. So you might think Japan has limited direct exposure to the Iranian crisis. You would be wrong.^[7]

Japan gets 95 percent of its crude from the Middle East. Roughly 70 percent transits the Strait of Hormuz.^[14] It doesn't matter that none of it is Iranian oil — almost all of it passes Iran. The distinction between "buying from Iran" and "depending on the strait Iran controls" is the kind of distinction that looks meaningful on a sanctions compliance form and is completely meaningless when tankers stop moving.

Japan's LNG exposure is lower — about 11 percent of imports, with 6 percent through the strait — because Australia, not Qatar, is its primary gas supplier. That's the one piece of good news. The bad news is everything else.

On the oil side, Japan holds emergency reserves equivalent to 254 days of consumption: 146 days in national stockpiles, 101 in private-sector reserves, and 7 days in joint arrangements with producing countries.^[8] That sounds comfortable. And it is comfortable — for a while. The problem is that reserves are a wasting asset. You draw them down, and at some point you're negotiating with every other reserve-depleting country on the planet for the same non-Hormuz barrels. The competition for Atlantic Basin and West African crude is about to get very crowded.

Analysts are forecasting 0.6 percent lower GDP growth for Japan if disruptions persist, which would push an already fragile economy into what politely gets called "stagflation" and impolitely gets called "the worst possible outcome for a central bank that just started hiking rates." The BOJ raised to 0.75 percent last week. The timing is — well, the timing is what it is.

China: the hedged bet

China's position is, characteristically, more complicated and more interesting than it looks.^[9]

Start with the numbers. About 50 percent of China's oil imports and nearly 30 percent of its LNG come through the Strait of Hormuz. Iran accounts for roughly 12 percent of China's crude imports — about 1.38 million barrels per day — though the actual figure is deliberately hard to pin down, because much of it arrives via what the industry euphemistically calls the "shadow fleet": tankers that load at Kharg Island, do ship-to-ship transfers near Malaysia, and show up at Chinese ports relabeled as Malaysian or Indonesian crude.^[15]

The refineries processing this oil are mostly small, independent "teapot" operations in Shandong province — about 150 of them, handling a fifth of China's refining capacity. The teapots exist in a deliberate gray zone: small enough to avoid the international sanctions scrutiny that would hit Sinopec or PetroChina, flexible enough to rebrand cargo origins, and dispensable enough that if the U.S. sanctions a few (they've sanctioned three so far), it doesn't threaten China's major state-owned enterprises. The whole arrangement is a sanctions-evasion architecture designed to look like it isn't one. Elegant, in its way.

But here's where it gets structurally weird. China declared neutrality in the conflict, which sounds principled until you map the incentives:^[11]

1. China needs Iranian oil (cheap, plentiful, sanctions-discounted by $8-10 per barrel).
2. China also needs Saudi, Emirati, Kuwaiti, and Iraqi oil (the other 38 percent of its strait-dependent imports).
3. Iran is retaliating against Gulf states that host U.S. military infrastructure.
4. Those Gulf states are China's other major suppliers.
5. China is asking Iran to please stop threatening the strait through which China receives oil from countries Iran is attacking.
6. While also buying Iranian oil.
7. While also declaring neutrality.

Foreign Minister Wang Yi called his Iranian counterpart on March 2 to urge Iran to "pay attention to reasonable concerns of its neighboring countries," which is diplomatic language for "please stop blowing up our supply chain."^[10] One way to read this is that China has genuine leverage over Iran as its largest customer and can moderate Tehran's behavior. Another way is that Beijing is discovering that being everyone's friend doesn't work when your friends are at war with each other. A third way — and I suppose this is the most honest one — is that China's energy hedging strategy was designed for a world of sanctions and diplomatic tension, not a world of missiles and strait closures. The hedge works great in peacetime. In wartime, all your counterparties correlate.

The insurance problem

I keep coming back to the insurance point because it's the mechanism that matters most, and it's the one least discussed.

President Trump announced on March 3 that the U.S. Development Finance Corporation would provide "political risk insurance and guarantees for the Financial Security of ALL Maritime Trade, especially Energy, traveling through the Gulf."^[13] Set aside the capitalization choices. The question is: what mechanism did you have in mind?

The DFC's standard political risk insurance covers expropriation, currency inconvertibility, and political violence. It does not typically cover active-warzone transit risk for oil tankers. The coverage limits, the pricing, the claims process — none of this has been articulated. It's a press statement doing the work of a term sheet. Which is to say: it's not doing any work at all, yet.

Meanwhile, OPEC+ has pledged an additional 206,000 barrels per day in output. The strait typically handles 20 million barrels per day. The gap between the problem and the announced solution is roughly 19.8 million barrels per day. Unsatisfying.

What the plumbing tells you

Three countries. Three different exposure profiles. But the structural lesson is the same:

India optimized for price (cheap Russian crude, then cheap Gulf crude) and ended up maximally exposed when the cheapest source became the most disrupted source. Its reserves are thinner than the headline number suggests, and its currency is a direct transmission mechanism for oil shocks.

Japan optimized for alliance compliance (no Iranian oil since 2019) and ended up with 95 percent Middle East dependence anyway, because the alternative suppliers — Russia is sanctioned, Iran is sanctioned, Venezuela is sanctioned — were progressively removed from the menu. Japan has the deepest reserves of the three but also the most brittle economy to absorb a prolonged shock.

China optimized for optionality (buy from everyone, through every channel, including the gray ones) and ended up with a portfolio that is technically diversified but physically concentrated in the same 21-mile-wide corridor. Its shadow fleet can't dodge a closed strait.

All three countries made individually rational decisions that produced collectively fragile outcomes. The common thread isn't recklessness or bad planning. It's that the global energy system is, at its core, a geography problem, and geography is the one variable you can't hedge.

I don't know how long the strait stays closed. I don't know whether the DFC insurance proposal becomes real policy or remains a press release. I don't know if China's quiet diplomacy with Iran works, or if India's pivot back to Russian crude happens fast enough. What I do know is that 20 million barrels a day used to flow through a 21-mile gap, and right now they don't, and every contingency plan in Asia is about to be tested against the only thing that matters: how many actual barrels are in actual tanks, and how many days they last.

The rest is commentary.