Hormuz is becoming the world's most expensive traffic jam — and Australia is paying for it

The Strait of Hormuz does not have to be completely closed to disrupt the global economy. Restricted shipping, selective passage and continuing uncertainty are demonstrating how much economic power can be exercised over one of the world's most important energy corridors.

For months the world has asked a seemingly simple question about the Strait of Hormuz:

Is it open or closed?

Increasingly, that may be the wrong question.

The more important question is:

How much oil and gas can actually get through it — safely, reliably and economically?

The answer remains troubling.

Shipping through the Strait of Hormuz continues at dramatically reduced levels as the confrontation involving Iran and the United States remains unresolved.

Ship-tracking data reported by Reuters showed just seven commodity vessels transited Hormuz on Thursday, August 20, following 14 the previous day. Earlier in the week, traffic had fallen as low as six vessels in a day.

There were no very large crude carriers or LNG tankers among Thursday's recorded transits.

Before the conflict, the Strait was the route for a substantial share of the world's internationally traded oil and liquefied natural gas.

The waterway may not therefore need to be physically sealed to have profound economic consequences.

It merely needs to become dangerous, unpredictable and expensive.

That appears increasingly to be what the world is experiencing.

Hormuz is operating — but it is not normal

The distinction matters.

The United States and Iran have made competing claims about the status and control of the Strait.

But shipping companies, tanker operators, insurers, oil producers and commodity traders do not make decisions according to political descriptions.

They make them according to risk.

A waterway can technically be "open" while commercial operators remain reluctant to use it.

That is effectively an economic restriction.

The Strait of Hormuz is particularly vulnerable because there is no equivalent alternative maritime route capable of simply absorbing everything normally carried through it.

The US Energy Information Administration describes Hormuz as one of the world's most important oil transit chokepoints.

Geography created the problem.

Iran lies to the north.

Oman and the United Arab Emirates lie to the south.

Between them is a narrow passage connecting the Persian Gulf with the Gulf of Oman and ultimately the Indian Ocean.

Some of the world's largest petroleum-producing countries sit behind that bottleneck.

For decades, enormous volumes of energy have passed through it every day.

The global economy became accustomed to that happening almost routinely.

It no longer can.

Iran may not need to completely close Hormuz

This is perhaps the most important lesson emerging from the crisis.

A complete physical closure would be dramatic.

It would also invite an enormous international response.

But there is another way of exercising leverage over a maritime chokepoint.

Make passage uncertain.

Make insurers nervous.

Make tanker owners reconsider.

Make shipping companies calculate whether the cargo is worth the risk.

Make countries negotiate for access.

And allow enough vessels through to demonstrate that passage remains possible.

The economic effect can still be enormous.

Iran has maintained that the Strait is closed while the United States has argued that it remains open.

The ships themselves tell a more useful story.

Traffic remains far below normal levels.

Then came an extraordinary development

Iran has reportedly granted permission for a number of Iraqi oil tankers to pass through Hormuz.

That is important far beyond the individual vessels involved.

Iraq has been particularly exposed to the disruption because much of its oil-export infrastructure depends upon access through the Gulf.

Before the war it produced around four million barrels of oil per day.

Reuters reported on August 22 that Iran had allowed a number of Iraqi tankers passage while overall Strait traffic remained significantly below pre-war levels.

Think about the implication.

If permission matters, then access itself has acquired value.

That turns Hormuz from merely a geographical chokepoint into a potential instrument of economic influence.

It also raises a much larger question.

Could selective passage become more useful to Iran than complete closure?

Saudi Arabia is testing the route again

Another important development has emerged from Saudi Arabia.

Saudi Aramco has resumed loading oil from inside the Strait of Hormuz after a period in which Saudi Arabia increasingly relied upon alternative infrastructure.

Saudi Arabia possesses an enormously important strategic advantage: its East-West pipeline can move substantial quantities of crude from the country's eastern producing areas towards the Red Sea.

That does not make Hormuz irrelevant.

But it provides Saudi Arabia with options that some other Gulf producers do not possess.

The resumption of Aramco loading inside Hormuz is therefore significant.

It demonstrates that some commercial movement is possible.

It does not demonstrate that normality has returned.

Indeed, the fact that individual tanker movements have become noteworthy tells us how abnormal the situation remains.

China has a problem

Few countries have more at stake than China.

China is a huge importer of Middle Eastern crude and the principal customer for Iranian oil.

But Chinese companies are adapting.

Reuters reported that major Chinese state-owned shipping companies have been avoiding both Hormuz and Bab al-Mandeb since late July.

Instead, companies have been using strategies including ship-to-ship transfers outside the Gulf.

Oil can be transferred near places such as Fujairah and Oman, allowing some tankers to avoid entering the highest-risk areas.

But there is no free solution.

Complexity costs money.

Extra tanker movements cost money.

Waiting costs money.

Insurance costs money.

And risk costs money.

Reuters reported that freight rates between Oman and China had quadrupled to around US$140,000 a day per vessel amid wartime premiums.

That is how a distant conflict eventually reaches consumers thousands of kilometres away.

Oil is responding

Brent crude settled on Friday at US$94.39 a barrel.

West Texas Intermediate settled at US$87.06.

Brent had climbed from around US$90 at the end of July as markets continued pricing the risk surrounding Iran, sanctions and global supply.

President Donald Trump has threatened further economic consequences for countries supporting or trading with Iran.

Iran has dismissed the threatened measures and remains defiant.

The combination is toxic for energy markets:

restricted shipping;

geopolitical confrontation;

uncertain supply;

sanctions risk;

and no clear diplomatic resolution.

Oil markets do not need actual shortages before prices respond.

They price the possibility of shortages as well.

Australia is thousands of kilometres away — but not economically

Australia does not need to import crude directly through Hormuz for Australians to be affected by what happens there.

Oil is internationally traded.

Australian fuel prices are influenced by international petroleum and refined-product markets, exchange rates, refining margins, freight and other costs.

If disruption pushes international prices higher, Australian importers compete in that higher-priced market.

That can eventually reach motorists through petrol and diesel prices.

But motorists are only the beginning.

Diesel powers trucks.

Diesel powers agricultural machinery.

Fuel moves freight.

Aircraft require aviation fuel.

Mining consumes substantial quantities of diesel.

Construction equipment needs fuel.

Fishing vessels need fuel.

Ships need fuel.

When energy becomes more expensive, the cost does not remain at the service station.

It moves through the economy.

The supermarket connection

Consider something as ordinary as a supermarket product.

It may be produced on a farm using diesel-powered equipment.

Fertiliser may have energy-intensive inputs.

The product may be transported to a processor.

Then to a warehouse.

Then to a distribution centre.

Then to a supermarket.

Refrigeration consumes energy throughout parts of that chain.

Packaging has its own energy and transport inputs.

The customer sees only the final price.

But embedded inside that price are numerous energy costs.

That is why prolonged oil-market disruption matters to Australia even if no Australian tanker ever passes through Hormuz.

Farmers may feel it particularly strongly

Australian agriculture is especially exposed to fuel and fertiliser costs.

A farmer cannot simply stop harvesting because diesel has become expensive.

A cattle producer cannot eliminate transport.

A regional business cannot make the distance between towns disappear.

Higher energy prices therefore disproportionately affect an economy such as Australia's, where commodities and people frequently travel enormous distances.

The consequences can move from Hormuz to a tanker rate, from a tanker rate to an international commodity price, from that price to diesel and eventually into the cost of producing and transporting Australian goods.

The transmission is not instantaneous.

But it is real.

And then there is inflation

This creates another difficulty.

Australia has spent years trying to contain inflation.

Energy shocks complicate that task because higher fuel costs can spread through numerous categories of expenditure.

The Reserve Bank cannot reopen the Strait of Hormuz.

It cannot increase Middle Eastern oil production.

It cannot escort tankers.

It cannot negotiate peace between Washington and Tehran.

Monetary policy can influence Australian demand.

It cannot manufacture oil.

That distinction matters whenever externally generated price pressures arrive in Australia.

If the Hormuz crisis persists and contributes materially to higher energy and transport costs, it could complicate the inflation outlook even if domestic economic conditions remain comparatively subdued.

The world is adapting

This is another important feature of the story.

Markets do not simply wait for crises to end.

They adapt.

Saudi Arabia can use its East-West pipeline.

Chinese companies can arrange ship-to-ship transfers.

Tankers can be repositioned.

Alternative crude suppliers become more attractive.

Strategic reserves can be used.

Refiners can alter crude blends within technical limits.

Buyers can negotiate new contracts.

Every adaptation reduces vulnerability.

But many adaptations also increase cost.

That is the difference between supply existing and supply being economically available where it is needed.

The world may have enough oil in aggregate while simultaneously experiencing serious disruption in moving the right oil to the right refinery at the right time.

Hormuz has demonstrated the value of redundancy

There is a broader lesson here for governments.

Critical infrastructure looks expensive until it is needed.

Pipelines that bypass chokepoints are expensive.

Strategic petroleum reserves are expensive.

Alternative suppliers can be expensive.

Spare shipping capacity costs money.

Multiple supply chains can be less efficient than relying upon the cheapest supplier.

For decades globalisation rewarded efficiency.

The Hormuz crisis is demonstrating the value of resilience.

The cheapest supply chain on a spreadsheet is not necessarily the cheapest supply chain during a war.

Iran's leverage has changed

There is also an uncomfortable geopolitical reality emerging.

For decades analysts discussed Iran's ability to "close the Strait of Hormuz" almost as a binary proposition.

Iran would either close it or it wouldn't.

Events suggest reality can be much more sophisticated.

Iran does not necessarily need an impenetrable blockade to affect the world economy.

If shipping is reduced to a fraction of normal activity, insurers price extraordinary risks, some operators withdraw and individual countries seek passage for their vessels, enormous leverage has already been created.

The Strait can be physically passable while economically impaired.

That may prove one of the most consequential lessons of the entire conflict.

Watch the ships, not the rhetoric

There will continue to be statements from Tehran.

There will continue to be statements from Washington.

There will be threats, negotiations, sanctions and claims about who controls what.

For businesses and consumers, however, there are several more useful indicators.

How many vessels are actually passing through Hormuz?

Are very large crude carriers returning?

Are LNG tankers returning?

Are shipping insurers becoming more comfortable?

Are freight rates falling?

Is Saudi Arabia returning significant volumes to the route?

Are Chinese state-owned shipping companies prepared to re-enter?

And, ultimately, is Brent crude moving back towards levels that prevailed before the latest escalation?

Those indicators will tell us more about the restoration of normal trade than political declarations.

The Times View

The world has spent decades worrying that Iran might one day close the Strait of Hormuz.

The events of 2026 suggest that was too simplistic.

Iran does not need to place a physical barrier across the waterway to disrupt global trade.

A Strait through which ships are technically capable of sailing but reluctant to sail can produce many of the same economic consequences.

The latest developments — extremely low shipping traffic, permission for some Iraqi tankers to pass, Saudi Aramco cautiously returning and Chinese shipping companies finding ways around the danger — suggest that Hormuz is becoming something more complicated than either "open" or "closed".

It is becoming selectively usable.

And that may be a far more powerful geopolitical instrument than the world anticipated.

For Australia, the Strait of Hormuz can look very distant on a map.

Economically, it is much closer.

Every Australian business dependent upon fuel, every farmer operating machinery, every trucking company moving freight and every household confronting higher prices has an indirect interest in what happens in that narrow stretch of water.

For now, the most important thing to watch is not what either side says about Hormuz.

Watch the ships.

They will tell us whether the world's most important energy traffic jam is beginning to clear.