Is the Iranian Blockade Creating a Permanent Systemic Shock to Global Oil Prices? What the ICRG Said in 2025.

Summary – The Iranian blockade of the Strait of Hormuz has halted 90% of local maritime traffic, removing 20% of global LNG supply and driving major force majeure declarations from QatarEnergy and Alba. This crisis has triggered a flight to quality toward Western energy firms, including Exxon Mobil and Cheniere Energy, amid suspended war risk insurance and rising oil prices. The situation highlights the critical utility of ICRG political risk metrics in anticipating oil volatility, as the recent geopolitical, security, and supply shocks create a new, high-cost environment for global energy markets.

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The global energy landscape has shifted following the effective Iranian blockade of the Strait of Hormuz, which has paralyzed nearly 90% of local maritime traffic and removed roughly 20% of the world’s LNG supply.

The US authorized naval escorts and – quite significantly – ordered the Development Finance Corporation (DFC) to provide emergency political risk insurance to stabilize shipping. Despite these efforts, the market remains on edge as major regional producers like QatarEnergy and Aluminum Bahrain (Alba) declare force majeure, forcing global supply chains to look elsewhere for stability.

For our investor clients, this volatility has driven a flight to quality among Western energy majors. Exxon Mobil (XOM) and Chevron (CVX) have both touched record highs as the market pivots toward stable, non-Gulf production, while Cheniere Energy (LNG) captures the vacuum left by disrupted Middle Eastern natural gas exports.

With private marine war risk insurance currently in a state of suspension, the focus remains on the US military’s ability to restore safe passage and prevent a long-term inflationary shock to the global economy.

These developments underscore the warnings from our International Country Risk Guide (ICRG), as we recently downgraded the political risk scores for much of the Middle East.

Historical data suggests that ICRG’s political metrics for OPEC nations can account for nearly 18% of oil price fluctuations. The sharp drop in “External Conflict” and “Government Stability” scores for #Iran over eight months ago served as a leading indicator that the geopolitical risk premium was underpriced, transitioning from low-level friction to a state of direct interstate warfare.

The current crisis represents an “accelerated systemic shock” where traditional market stabilizers are being overwhelmed by security risks. As energy-driven inflation spikes toward $100 USD per barrel, it acts as a global tax on industrial production.

For our institutional investor clients managing portfolios, the ICRG metrics highlight a critical shift: while higher prices may temporarily bolster the budgets of some exporters, those gains are being neutralized by the soaring security costs and investment risks now embedded in the Middle Eastern corridor.

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CHRISTOPHER MCKEE, PHD CHIEF EXECUTIVE

Christopher McKee is PRS’ CEO and Owner. An international political economist, global investor, entrepreneur, and author, Chris received his PhD from Queen’s University (Canada) and has been involved in the field of geopolitical risk, limited recourse financing, and private sector development for the past 25 years.