Iran war: Academic warns of ‘system-wide supply shock’ as Hormuz crisis deepens
Tuesday, 14 April 2026
Economic conditions are expected to deteriorate fast and a supply shock could unfold in a matter of days, according to a US academic, as efforts to tame uncertainty in the Middle East surrounding the Strait of Hormuz run dry and Trump’s blockade efforts begin.
University of Chicago professor Robert Pape believes global markets are not prepared for the next wave of impacts from the Iran war.
He says the economic consequences of the disruptions will expand from being a price shock to a “system-wide supply shock”.
“Within 10 days, parts of the global economy will start running short of critical goods,' Pape wrote on social media platform X, formerly Twitter.
'Not just higher prices - shortages. Markets are not ready for this.'
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In his Escalation Trap Substack, Pape, who is an acclaimed academic and author and who took part in the Christchurch Call, said price spikes led to physical shortages, which led to economic contraction: “We are now crossing into step 2 . That's when things break.
“20% of global oil flows through the Strait of Hormuz. That flow is now constrained - by Iran AND the US - and it's not just oil, it's the base layer of modern production - fuel, fertiliser, plastics and much more,” said Pape.
“Once inventories run down, this stops being about expensive inputs, it becomes missing inputs. Factories don't slow because costs rise, they stop because materials don't arrive.
He said the world had already seen a smaller version of what was happening, with the 1973 oil shock, where about a 7% supply disruption led to shortages, rationing, and industrial decline in under 90 days.
“Today's shock is larger,” he said, adding the world was at Day 45 of the current crisis.
The world was getting to a time where “price no longer determines outcomes; access does, and once that flips, governments start choosing winners and losers.”
Pape said that by the time these shortages showed up in headlines, it was already too late.
Publicly available data shows fuel shipments into NZ only until April 23.
This has raised questions about how easily available supply will be after this time.
However, the Government says New Zealand continued to have sufficient levels of petrol, diesel and jet fuel, equivalent of about 60 days cover of petrol, 49 days of diesel and 51 days of jet fuel.
Prime Minister Christopher Luxon said the country’s fuel importers continue to report “no material issues with incoming shipments”.
In response to questions about guaranteed fuel supply after the April 23 shipment arrives, Luxon said the Government was still looking at ways to secure additional fuel supply above what it currently had.
“New Zealand is actually in quite a strong position, if I think about even relative to, say, Australia. We lifted our minimum stock holdings when we first came to Government, and that has served us quite well. But what we're looking for is a world where should we have a disruption down the road…we want to have additional supply as well,” he told reporters on Monday.
He did not reveal details of ways the Government was looking to increase its supply, except for saying negotiations were under way.
Fuel importers had shipments scheduled through to the end of May, and some, into June, he said.
“A lot of the refineries we've dealt with in Korea and Singapore, they're finding alternative crude sources other than the Middle East, and that’s giving everyone quite a bit of confidence in the system. Not wanting to be complacent about it, but job number one for us is to make sure that we maintain fuel supply in New Zealand, because if we lost that, then obviously that has a bigger implication on jobs.”
However, CNBC is reporting that congestion in Singapore’s waters is rising as the Iran war disrupts shipping routes, forcing vessels bound for the Middle East to anchor near its ports.
Luxon has previously said there would be 'some form of disruption to fuel at some point in time', but insists 'business as usual' for now.
Some have questioned the Government’s strategy this far and its decision to continue as usual rather than to limit the use of supplies to safeguard against any future supply constraints.
Luxon said even when the strait reopened and there was a permanent end to the conflict, disruption to supply chains and energy infrastructure in the Middle East would mean fuel supply and price volatility in New Zealand would continue for some time.
AA fuel prices spokesperson Terry Collins says uncertainty about supply availability and what that does - or will do - to prices, is the issue.
“There is confusing commentary around what is and what is not blockaded. Stories of ships being turned around, etc. What we do know is that the Asian refineries have used the oil that was in transit before the conflict started. What the impact will mean is very unpredictable as the USA is very fickle when it comes to making decisions,” Collins said. “This will go for months not weeks and where the average price of fuel ends out after the conflict is anyone’s guess.”
The price of oil increased to US$100 per barrel on Monday, as the US military launched its operation to restrict the movement of ships through the Strait of Hormuz.
It is working to stop any ships from entering or leaving Iran’s ports, while allowing vessels from other countries to keep moving through the channel.
Prices are expected to soar to US$150 per barrel if the blockade continues.
The US its aiming to squeeze Iran’s economy without choking global oil supply. However, Iran has warned that if its cargo docks are blocked, it’ll close the strait to everyone.