Hormuz Crisis Pushes Brent Past $112, Exposing China's 40% Energy Chokepoint as Strategic SPR Drawdown Begins
Brent crude settled at $112.57 per barrel on Friday, capping a 54% surge since the Strait of Hormuz closed to commercial shipping on March 2 — the largest monthly oil price increase in market history. WTI hit $101.17, gold broke $4,567/oz, and the VIX closed at 31.05, its highest sustained level in over a year. For Chinese corporates with global supply chains, this is a structural repricing of energy risk, not a transient spike.
Iran's closure of the Strait of Hormuz following the outbreak of the US-Iran conflict on February 28 has removed approximately 17.8 million barrels per day of oil transit capacity — 20% of global supply. The US military campaign to reopen the strait, launched March 19, has yet to restore commercial shipping. Goldman Sachs estimates a $14–18/bbl war premium is now embedded in Brent, with scenarios of $150+ if the blockade extends beyond Q2. Monday's modest futures rally (+0.6% on S&P 500 futures) reflects fragile optimism around Trump's claim of "productive" Iran talks, not fundamental de-escalation.
China routes 40–50% of its seaborne crude imports through Hormuz, making it the single most exposed major economy. Beijing has begun drawing on its strategic petroleum reserves — estimated at 1.3 billion barrels — providing roughly 90 days of import cover. However, the secondary effects are already materializing: PBoC faces an inflation pass-through dilemma as energy costs feed into PPI, complicating the easing cycle. Chinese outbound M&A in energy assets and supply chain diversification via Russia's ESPO pipeline and overland Central Asian routes are accelerating. Firms with dollar-denominated energy procurement face a compounding FX headwind as the DXY holds firm at 100.3.
48–72 hour triggers: Fed Chair Powell speaks today at Harvard — any signal that oil-driven inflation delays rate cuts will pressure risk assets further. The Trump-Xi summit at month-end could yield energy cooperation signals. Base case (60% probability): Hormuz remains partially blocked through Q2, Brent oscillates $105–120. Risk scenario (25%): Diplomatic failure pushes Brent above $130, triggering OECD-coordinated SPR release and a global growth downgrade. Action: Corporate treasuries should lock in energy hedges at current levels and stress-test supply chains for a 6-month Hormuz disruption scenario.