Is Hormuz a prelude to stagflation

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Is Hormuz a prelude to stagflation

Published: 02 Apr. 2026, 00:05

Audio report: written by reporters, read by AI

Kim Sung-jae

The author is a business administration professor at Furman University and author of “The Story of Tariffs” (2025).

On Oct. 6, 1973, Egypt and Syria launched a surprise attack on Israel to reclaim the Sinai Peninsula and the Golan Heights lost in the 1967 war. The conflict, which erupted on Yom Kippur, Judaism’s holiest day, quickly took an unexpected turn.

Israel, accustomed to swift victories in earlier wars, had underestimated the risk of conflict. Egypt’s President Anwar Sadat, by contrast, reformed a military long weakened by corruption and inefficiency, while strengthening it with Soviet support.

A man walks along the shore as oil tankers and cargo ships line up in the Strait of Hormuz, seen from Khor Fakkan, United Arab Emirates, on March 11. [AP/YONHAP]

In the early stages, Egyptian forces seized the initiative by crossing the Suez Canal. Israeli Prime Minister Golda Meir requested assistance, prompting the United States to provide military support. Once Israel regained air superiority, the tide turned.

As Israeli counterattacks pushed Egyptian forces toward encirclement, a ceasefire was reached on Oct. 25 through United Nations mediation. The aftermath proved more consequential. Six days before the ceasefire, U.S. President Richard Nixon asked Congress to expand military aid to Israel, triggering backlash from Arab oil producers. Led by Saudi Arabia, nine nations imposed an oil embargo on the United States and its allies. Over five months, ending March 18 the following year, global oil prices quadrupled.

The surge in oil prices delivered a severe supply shock. Inflation surged into double digits while growth slowed, ushering in stagflation. Countries responded by implementing energy-saving measures and establishing strategic petroleum reserves.

Today, the global economy again faces stagflation risk following a war that began in late February with U.S. and Israeli strikes on Iran. While hopes for an early end remain, oil supply conditions continue to worsen.

The scale is different. The 1973 embargo cut about 4.5 million barrels per day. In contrast, disruptions linked to Iran’s closure of the Strait of Hormuz have reduced supply by roughly 20 million barrels per day. Flows of natural gas and fertilizer feedstocks have also declined sharply.

The differences go beyond volume. In the 1970s, Iran did not join the embargo and helped buffer supply. Diplomatic efforts led by U.S. Secretary of State Henry Kissinger helped persuade Saudi Arabia to lift the embargo early, allowing supplies to recover.

Now, there is little certainty over when the Strait of Hormuz will reopen. Even if passage resumes, restoring supply will take time. Diplomatic options also appear limited.

Ultimately, the issue is not just higher oil prices but the persistence and spread of the shock. The lesson of the 1970s is clear: Supply disruptions often begin underestimated, but their costs exceed expectations.

This article was originally written in Korean and translated by a bilingual reporter with the help of generative AI tools. It was then edited by a native English-speaking editor. All AI-assisted translations are reviewed and refined by our newsroom.