The repercussions of closing Hormuz: stranded ships, a pharmaceutical crisis, and the release of oil reserves

The consequences of Iran’s closure of the Strait of Hormuz are extending into new sectors day by day since the outbreak of its war with the United States and Israel. The crisis is no longer limited solely to oil and gas; it has subsequently impacted the pharmaceutical and medical sectors, leaving European countries facing an uncertain future after being forced to draw from their strategic oil reserves.

Observers increasingly warn that even if hostilities were to end swiftly and Iran decided to reopen the strait, the economic and energy repercussions could persist for some time, contributing to rising inflation and industrial costs.

Regarding the repercussions of Iran’s closure of the Strait of Hormuz on Europe, a Euronews report states that “this Iranian action is causing turmoil in global markets, leading to a sharp rise in energy prices and fueling fears of supply shortages.”

The site points out that “this waterway is one of the most important energy corridors in the world, as between a quarter and a third of global oil shipments, and about a fifth of liquefied natural gas, pass through it. Its closure has sent a shockwave through global markets. European Union estimates indicate a 70% increase in gas prices and a 50% increase in oil prices, leading to a €13 billion increase in the fossil fuel import bill.”

In the face of continuous pressure from the strait’s closure, the “G7 leaders—the heads of state of Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States—announced on March 30 their readiness to take any necessary measures to ensure the stability of global energy and supplies.”

The direct impact of the Strait of Hormuz crisis—according to the website—is characterized by “the sharp rise in energy prices, driven by a sudden supply shortage and uncertainty about the duration of the disruptions. Up until March 18, the closure of the strait led to the withdrawal of an estimated 11 million barrels per day from global supplies.”

Furthermore, analysts warn that prices could surge significantly in worst-case scenarios, drawing parallels to the oil crisis of the 1970s. Natural gas prices are also witnessing an increase, amid fears of returning to the levels seen during the 2022 energy crisis following the Russian invasion of Ukraine.

Euronews notes that “the main crisis is centered on the EU’s heavy reliance on refined fuels, such as diesel and jet fuel, from Gulf countries, making it vulnerable to refinery disruptions. The bigger crisis is that analysts estimate that restarting stalled facilities could take several months, while completely rebuilding damaged sites could take up to three years.”

A Crisis of Vital Materials

The energy shock resulting from the Iranian regime’s actions comes at a difficult time for the European economy. Euronews reports: “Before the conflict, EU countries were already suffering from high energy costs and declining industrial competitiveness. Energy-intensive sectors, such as steel, chemicals, and cement, had demanded urgent support. The current crisis threatens further sharp price increases and potential fuel shortages, exposing underlying vulnerabilities in the EU’s energy system.”

On the other hand, a BBC report confirms that “petrochemical derivatives, such as methanol and ethylene, are vital materials in the global production of pharmaceuticals, including painkillers, antibiotics, and vaccines. The Gulf Cooperation Council (GCC) countries account for about six percent of the global petrochemical production capacity.”

The report warns that “these countries primarily use the Strait of Hormuz to export these chemicals to the wider world, with about half of them going to Asia. Meanwhile, India produces one-fifth of the world’s generic drug exports, much of which is sent to the United States and Europe.”

Additionally, the report indicates that “many of these pharmaceutical products are typically transported to global markets via major Gulf airports, especially the port of Dubai. Some analysts have warned of a potential rise in drug prices as a result of the disruptions occurring in the Strait of Hormuz.”

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France’s Permanent Representative to the United Nations, Jérôme Bonnafont, stated on Thursday that it is unacceptable for Iran to hold the Strait of Hormuz “hostage,” emphasizing that its reopening is a priority.

On March 6, the seventh day of the war, French Transport Minister Philippe Tabarot announced that around 60 French ships were currently stranded in the waters of the Gulf and the Red Sea. He confirmed that there were specifically 52 ships in the Gulf waters and eight ships in the Red Sea.

Energy, fertilizer, and petrochemical prices have risen sharply due to Iran’s de facto closure of the Strait of Hormuz. This has halted the arrival of about 20 million barrels of oil per day to global markets—roughly one-fifth of global oil and gas supplies—rapidly spreading the consequences across economies and supply chains.

A few days ago, the French Finance Minister announced that his country had released 580,000 barrels out of its total commitment as part of the release of strategic reserves coordinated by the International Energy Agency (IEA) to address the Middle East crisis. Paris confirmed its commitment to releasing 14.6 million barrels of oil.

The member states of the International Energy Agency had previously agreed to release a total of 400 million barrels of oil into the markets, marking the largest intervention of its kind in the organization’s history.

The European Union maintains emergency oil reserves equivalent to at least 90 days of consumption, with total European stocks estimated at about 100 million tons. Gas storage rules usually require reserves to be 90% full by November; however, this requirement was relaxed to 75% to avoid panic buying.

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