Past oil-disruption exercises rejected a full Hormuz closure as not credible, leaving planners without a playbook

The full closure of the Strait of Hormuz, the chokepoint through which roughly one-fifth of global oil and liquefied natural gas moves, was repeatedly considered and discarded in pre-crisis planning exercises, leaving governments and the energy industry without a coordinated playbook now that the disruption has arrived. Brent crude is at $126 per barrel — a reading the planners who built the existing models did not believe the system could reach.

In a 2007 oil-disruption exercise convened by the non-profit Securing America's Energy Future, experts considered modelling a full Hormuz shutdown and ultimately rejected it. "The idea was laughed out of the room," Sam Ori, who worked on that exercise and is now executive director at the University of Chicago's Institute for Climate and Sustainable Growth, told a SAFE conference. "The view was that it just wasn't credible and would be seen as alarmist." The 2007 exercise modelled a smaller disruption that took a year to push oil to $165 per barrel; today's closure has reached $126 in two months.

A 2022 task force led by representatives of International Energy Agency member countries reached the same conclusion for different reasons. Landon Derentz, then at the US Energy Department and now at the Atlantic Council, said the group rejected modelling a full closure because it had never happened and because the response would have required diplomacy beyond the IEA's bandwidth. "Even if you convinced yourself maybe we should exercise it, the consequence of shutting the strait down was so significant that you couldn't really respond to it as an institution alone," Derentz said. An IEA spokesperson and a former senior IEA official said the agency has long considered closed-Hormuz risks in its emergency planning, including in a 2019 review, and that the 2022 task force was a separate exercise focused on existing strategic reserves.

TotalEnergies chief executive Patrick Pouyanné said in an interview with Axios that the strait's vulnerability was systematically underrated. "I never looked at a map as precisely as I have done in the last few weeks at the Strait of Hormuz," Pouyanné said. "It's part of the sea, anybody can navigate it." Because Hormuz is not a canal like Suez or Panama, he added, "the potential for it to be closed was probably underestimated."

Energy historian Daniel Yergin, who took part in the 2007 exercise, said the modelling assumptions reflected a different threat environment. "That was before drones," Yergin said. "A cheap drone can now do enormous damage to a very large oil tanker." The current closure follows weeks of attacks on shipping in the strait; the first LNG tanker reportedly crossed on 28 April after the US-Israeli strikes on Iran, but transit collapsed again as Iran extended its blockade and the French and UK navies moved to monitor stranded vessels.

The blind spot reflects what late Harvard economist Martin Weitzman called the "dismal theorem": low-probability, high-consequence scenarios that overwhelm conventional analysis and fall outside normal policy planning. Militaries have separately modelled the conflict risk around the strait, but usually in isolation from energy planners and economists, Derentz said.

The United States is better insulated than in 2007. The US economy is far less oil-dependent following decades of fuel-economy rules, and is now the world's largest producer of oil and natural gas, providing a buffer from the price surges hitting other importers. But the planners who built the older models say that buffer does not extend to the rest of the world's exposure, and that the assumptions behind those models — stable US foreign policy, no cheap stand-off weapons — no longer hold. "If this goes on for another three months," Ori said before oil reached $126, "people's view of that is going to change."