Hormuz blockade triples German factory shortages

The Strait of Hormuz has now been shut to commercial shipping for three months, and the shock has moved from the Gulf into European industry. German chemical firms reporting material shortages rose from 7% in April to 31.1% in May (Wiwo/ifo, 28 May). ifo economist Anna Wolf described the rise in orders as "temporary." Companies are preparing for a longer squeeze, because even a diplomatic agreement this week would not put tankers back through Hormuz at normal rates.

Insurance is what keeps the strait closed

The hard constraint is not only military risk. On 5 March, the major P&I clubs, the mutual insurers that cover crew, cargo and environmental liability for almost every commercial vessel, cancelled war-risk cover for Hormuz (Property Casualty 360, March 2026). Without that cover, a ship cannot dock at any port. For the vessels still attempting the crossing, hull war-risk premiums are at 5.5% of vessel value. A single voyage on a large tanker now costs more than $6 million in insurance alone (The Flow Weekly, 26 May).

That is why tankers and LNG carriers are going round the Cape of Good Hope, adding weeks to each journey. LNG transits through the Suez Canal have fallen by roughly 90%, according to shipping tracking data (Schiffsradar24.de). The detour ties up ships across the system and raises freight costs even for cargoes that never had to pass through the Gulf. For an island economy like Malta's, where almost everything arrives by sea, this is how a distant chokepoint becomes a domestic price problem.

Diplomacy has not caught up with the insurance market. Trump's Situation Room meeting on 29 May ended without a deal, while Tehran disputes his description of the terms (PBS News, Al Jazeera). Even if an agreement is signed, it would only start the recovery. Mine-clearance takes four to six months. Lloyd's would then need to reclassify the zone before insurers restore normal cover. Full throughput before January 2027 is unlikely (LMA Lloyd's).

The €15 billion storage gap

Europe normally fills gas reserves in summer so it can get through winter heating demand. This year, the filling season is badly behind. Germany's reserves are at 30.6%, about half the 67% level normally seen in late May (BDEW). The EU energy regulator ACER estimates that closing the gap across Europe will cost an extra €10–15 billion (EMA Energiewelt). That money moves through utilities and lands with households and industry as higher bills.

German factories are already cutting hours to get through the supply shock. The ECB, the European Central Bank that sets interest rates for the 20 eurozone countries, is expected to raise rates by 0.25 percentage points on 11 June. Markets put the probability of a rise at 91% (ECB Watch, Euronews). Borrowing is getting dearer just as factories and households are losing money to energy bills.

The global cushion is also wearing thin. The IEA's 400-million-barrel strategic release is already about 55% consumed, and the cumulative supply deficit could reach 900 million barrels by September (Brookings), just as summer driving and cooling demand peaks. Bypass pipelines through Saudi Arabia and the UAE can carry only a fraction of what Hormuz handled before the crisis.

Rainer Seele, chairman of ADNOC XRG and a veteran of Gulf and European energy markets, put it simply: "The recovery of supply chains will not come overnight. It will take months" (Tagesspiegel, 27 May). By autumn, every lost week will be visible in Europe's gas reserves.