Chevron CEO Mike Wirth stated that the closure of the Strait of Hormuz amid the Iran war is causing significant disruptions in the global oil supply chain, which will lead to physical shortages worldwide [1]. Speaking at the Milken Institute's Global Conference, Wirth emphasized that economies, particularly in Asia, will be the first to contract as demand adjusts to the supply shock, followed by European countries [1]. He noted that the U.S., as a net exporter of crude oil, would be less affected initially, but would eventually feel the impact as well [1].
Wirth highlighted that surplus supply from commercial markets, shadow fleets, and national strategic reserves are being absorbed, and that 'demand needs to move to meet supply,' indicating that economic activity will have to slow down in response to the supply constraints [1]. He compared the potential impact of the Strait of Hormuz closure to the energy crises of the 1970s, referencing the Yom Kippur War and the Iranian revolution [1].
The closure has led to a spike in energy prices, with global crude oil benchmarks West Texas Intermediate and Brent both trading over $100 a barrel, after previously surging above $110 a barrel due to the conflict [1]. This surge has also pushed the national average price of gasoline in the U.S. to more than $4.48 a gallon, up over 41% from $3.16 a year ago, according to AAA data [1]. Jet fuel prices have similarly risen, exceeding $4 a gallon since the outbreak of the war, compared to less than $2.50 before the conflict began [1].
The dramatic increase in jet fuel prices has had downstream effects, including contributing to the failure of Spirit Airlines, whose bankruptcy exit plan was undermined by mounting costs [1].
CONCLUSION
The closure of the Strait of Hormuz has triggered a sharp rise in global oil and fuel prices, with Chevron's CEO warning of imminent physical shortages and a necessary slowdown in economic activity, especially in Asia and Europe. The situation is drawing comparisons to the energy crises of the 1970s, and its ripple effects are already impacting industries such as aviation. Market sentiment is negative, and the overall impact is expected to be high.