The Hormuz Crisis Is a Supply Chain Design Problem, Not an Energy Problem.
War risk insurance for a tanker crossing the Strait of Hormuz rose from around $40,000 per transit to over $600,000 after February 28. The strait technically remained open. The insurance market made it economically equivalent to closed. That distinction matters because it tells you something the headline oil price does not: the disruption is running through insurance markets, and insurance markets do not wait for ceasefire announcements.
What received less attention than the oil price reaction is that 55% of global potassium trade, 30% of urea, and 25% of ammonia also move through the same 33-kilometre channel. FOB urea prices in Egypt jumped from around $450 per metric ton to $700 within weeks. Northern Hemisphere farmers entering spring planting season cannot wait for diplomatic resolution. The FAO projects global fertilizer prices at 15 to 20% above pre-crisis levels through mid-2026, and the WFP estimates that 45 million additional people could face acute hunger if the disruption extends past June. The oil market has rerouting options. Agricultural supply windows do not.
The conversation in most boardrooms centres on crude rerouting: Cape of Good Hope diversions, strategic petroleum reserve releases, how long prices stay above $100 before normalising. That framing fits the oil exposure. It misses the agricultural damage accumulating in real time across South and Southeast Asia, where farmers are making input decisions with fertilizer at 50% above its January price, and across Africa, where grain reserve buffers are thin. Rerouting LNG and crude takes weeks. The spring planting window in Asia cannot be recovered in the same season.
The design logic that created this exposure is straightforward. Concentrating flows of oil, gas, fertilizer, and ammonia through a single 33-kilometre channel followed decades of optimising for efficiency over resilience. Low prices and smooth flows repeatedly won out against the business case for redundancy. The current disruption diagnoses the exposure. It did not create it.
China receives ~38% of all oil transiting Hormuz, more than any other country, and as of early March 2026 held 1.39 billion barrels in crude storage, covering roughly 120 days of net imports. Renewable energy now accounts for over 60% of its total installed power capacity, with 1,200 GW of solar, the first country to cross that threshold. China’s ability to absorb an oil shock above $100 per barrel more durably than comparable economies follows directly from a decade of build-out motivated by reducing fossil fuel import dependence. That is a supply chain design decision, not a climate one.
The investment data confirms the structural direction. In 2025, clean energy attracted $2.2 trillion in new investment against $1.1 trillion for fossil fuels. 91% of new renewable capacity additions were cheaper than the lowest-cost fossil fuel alternative. Solar PV was 41% cheaper on average. These numbers reflect cost curves, not policy ambition. I have run my own scenarios across electrostates and petrostates, varying the main drivers, and every scenario points in the same direction: Wright’s Law in operation, where every doubling of cumulative solar production reduces cost by around 24%, and production has been doubling faster than any comparable technology in energy history. Batteries and electrolysers are on the same trajectory now. Each disruption to fossil fuel supply chains improves the relative economics of electrification faster than the scenario models predict.
The Hormuz disruption will ease. Traffic will resume, prices will fall, and boardroom attention will shift. What will not change is the underlying architecture: single-corridor concentration built for cost, exposed in full under stress. Countries and companies building structural insulation through domestic generation, storage, and diversified supply infrastructure are compounding that advantage over decades. The near-term risk that remains least priced is agricultural. Fertilizer supply chains have made none of the diversification moves that energy supply chains are beginning to make, and the planting window in Asia and Africa has no equivalent to a strategic petroleum reserve. If the disruption extends into summer, 2026 crop yields will reflect decisions farmers are making in April. That is the consequence no rerouting announcement resolves.
By Massimiliano Cervo, CEBC Member