The secondary effects of a functional closure of the Strait of Hormuz warrant investor attention, as refined product prices are rising faster than crude oil, potentially dealing a further blow to the global economy. The specific characteristics of Middle Eastern oil products mean that their supply disruption is driving up the fuels essential to the global transportation system at an accelerated pace.

As emphasized by Javier Blas, the issue is most acute for fuel oil, which powers ships. The near-paralysis of this shipping route delivers a "double whammy" for this product. Not only are Persian Gulf refineries a major direct source of fuel oil, but the region's crude oil also yields a higher proportion of fuel oil compared to other types. Consequently, fuel oil prices are climbing more rapidly than crude, with some unprecedented pricing emerging, raising concerns that supplies could soon dry up.

Simultaneously, jet fuel and diesel are also outperforming crude oil futures. Given that these prices impact businesses and households, focusing solely on WTI and Brent markets may lead to an underestimation of the potential effects on inflationary pressures and long-term growth prospects.

The market is also concerned that the majority of the crude reserves the International Energy Agency (IEA) plans to release might be ineffective. This is not only because the estimated 400 million barrels agreed upon by member countries would only cover roughly four days of global demand, but also because they may fail entirely to address the gap in global supply structure left by the absence of large volumes of Middle Eastern crude.

One commentator even suggested that taking Persian Gulf heavy crude "offline" would make it increasingly difficult for refineries in the United States and elsewhere to sustain diesel production.

Focusing only on crude oil prices risks underestimating the multifaceted impact of a Hormuz Strait closure on the global economy. The reasons are twofold: the Middle East is a key source of liquefied natural gas and refined products, and the disruption to the types of crude available to refineries has a knock-on effect on businesses that rely on specific fuels to operate.

If these products become increasingly scarce, prices will continue to rise until enough users are priced out of the market, causing demand to shrink in line with supply.