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TRANSCRIPT:
It is the world's busiest oil shipping channel, accounting for 31 per cent of all seaborne oil flows - or 13 million barrels per day.
Located between Oman and Iran, the Strait of Hormuz in the Gulf has effectively been closed following the strikes on Iran, launched by the US and Iran.
The ship-tracking platform MarineTraffic shows a 70 percent drop in vessel traffic through the strait, with vessels stranded or forced to take a different route.
Iran says it will "set fire" to any ships trying to pass through the Strait of Hormuz, but enforcing it would divert military resources from other operations.
That has seen oil prices surge by at least 8 per cent on the global market, with the international benchmark for oil, Brent crude, on Tuesday [[3 Mar]] surpassing $85 for the first time since July 2024.
Financial markets globally have plummeted as investors consider the potential economic impact.
Susannah Streeter is the chief investment Strategist at Wealth Club.
"We're set to be in an era of fresh energy volatility, just at a time when there had been hopes that energy prices will be coming down. It's adding fresh pain for households and companies around the world. Certain countries will be more exposed than others. And I think we're going to see this playing out in the days to come. But ultimately, it is the risks of conflict continuing to escalate with no end yet in sight that is really concerning investors and why you're seeing this financial market reaction."
Mr Trump has said that conflict could last four weeks - or even longer.
There are also concerns for what that could mean for consumers, particularly as it relates to household prices and the cost of petrol.
Addressing those fears, US President Donald Trump told reporters at the White House, he believes oil prices will drop once Iran conflict ends.
"Most people feel ... I tell you what, I have never had more compliments on something I did. People felt it's something that had to done. So, if we have a little high oil prices for a little while. But as soon as this ends, those prices are going to drop, I believe, lower than even before."
Standing alongside Mr Trump after bilateral talks, German Chancellor Friedrich Merz says the impacts on the global economy must be mitigated.
"This is of course damaging our economies. This is true for the oil prices and this is true for the gas prices as well. So that's the reason why we all hope that this war will come to an end as soon as possible. And we are hoping that the Israeli and the American army are doing the right things to bring this to an end and to have really a new government in place who is coming back to peace and freedom."
In Australia, long queues at petrol stations have prompted Energy Minister Chris Bowen to issue this warning:
"I do understand people's concerns, but it's important that people know we do have a good stock of petrol in reserve in Australia. There is no immediate threat to petrol supplies in Australia. There will be challenges in this difficult environment in the Middle East. The Straits of Hormuz is a very important supply chain for the world, not just for Australia, for the world, including to Singapore and South East Asia, where we get most of our petrol. So there are real challenges, but there is no need for panic buying. That will just make the situation worse."
Treasurer Jim Chalmers has written to the Australian Competition and Consumer Commission, asking it to monitor fuel prices and any instances of price gouging.
Reserve Bank governor Michele Bullock says there is no certainty on what will happen next.
Speaking at the AFR Business Summit in Sydney, she says the central bank is modelling a number of scenarios on energy prices - and the impact on the Australian economy and inflation.
"We're going to take some time to make sense of what it could mean for inflation here. A supply shock of this nature, for example, could add to inflation pressures and the potential implications for inflation expectations also are something that we're very alert to. At the same time, a prolonged impact on energy markets could have adverse effects on global economic activity and result in downward pressure on inflation, and it's not obvious how this might play out. So as much as I know the public would like more certainty about the direction of interest rates, it would be wrong for us to pretend we have greater certainty than we do."
Energy analyst Jess Ralston says countries are now having to seriously consider reducing their dependence on oil.
"Energy independence has been a hot topic for a number of years now, ever since Russia invaded Ukraine. And there's differing views about what energy independence actually looks like. I think that it's widely agreed by experts like the Energy Transitions Commission, the International Energy Agency - and a bunch of others - that moving towards renewables shields countries like the UK from those volatile international gas markets. And moving towards net zero technologies like heat pumps, like electric vehicles also means that we're not relying on those whims of geopolitical leaders like Putin. So it's really important that we start to move towards net zero, not just for climate change, but actually for our energy independence and for shielding ourselves when it comes to a future crisis."
