McKinsey: How Fuel Procurement Can Shift Amid Iran War

With ongoing volatility in the Strait of Hormuz, energy and procurement leaders must re-evaluate operational resilience and flexibility to safeguard supply continuity.

Global supply chains face mounting exposure to shocks, and the current disruption in one of the world’s most vital energy routes is pushing organisations to adapt faster than ever.

To offset lasting repercussions, procurement leaders need a clear, energy-focused strategy, McKinsey & Company reports.

Instability across global energy flows

The Strait of Hormuz, positioned between Iran, the United Arab Emirates (UAE) and Oman, underpins global energy trade. Roughly 20% of the world’s oil and liquefied natural gas transits the strait.

Annual trade through this corridor equates to about US$1.3tn, or US$3.5bn daily. In terms of barrels, that is around 20 million per day.

Ongoing tension has made it hazardous for shipping, with vessels stalled or rerouted on longer, costlier paths.

The result is widespread disruption and notable fuel price hikes. McKinsey & Company warns the current upheaval “is a system-level event, not a commodity fluctuation”.

The shockwaves have spread globally, from vulnerabilities in Thailand (which imposed remote working to curb fuel use), to skyrocketing at-the-pump prices across the US.

Since late February, shipping flows have fallen 94%. By early April, the impact was plain to see:

• Freight costs up 130%

• Natural gas cost up 57%

• Diesel and jet fuel up 110%

• Fertiliser costs up 30%

Businesses are racing to stay afloat, with procurement and energy teams central to stabilising operations and sourcing strategically.

“When a chokepoint breaks, procurement becomes mission critical,” explains Mauro Erriquez, a Senior Partner at McKinsey.

“The disruption in the Strait of Hormuz is constraining a major artery of global trade – impacting energy, chemicals, agriculture and manufacturing all at once.

“This isn’t a typical disruption. It’s a cascading, system-wide event. The old playbook – reacting to price changes – is no longer enough.”

Ripple effects through the energy system

The closure is rippling through oil, gas and derivative markets. Price spikes and supply restrictions are squeezing petrochemical and fertiliser producers, intensifying inflation and policy pressures worldwide.

Logistics networks, including 10% of global container capacity, are caught in the bottleneck.

Energy cargoes face extended transport times, rising insurance premiums, port delays and higher buffer inventories. The squeeze is bleeding into industrial sectors reliant on both feedstock and power, from metals to manufacturing.

As costs surge across diesel and fertiliser, supplier instability is deepening, putting supply chains at risk of fragmentation and recurring disruption.

“For procurement leaders, the implications go far beyond cost inflation,” adds Marc Sommerer, Partner at McKinsey.

“This is about resilience, visibility and speed of decision-making across entire value chains.”

Strengthening energy resilience

Companies in every region are mobilising to ease pressure on their supply networks, but the energy sector sits at the heart of mitigation efforts.

McKinsey has outlined five strategic actions that energy procurers could take:

• Establish a nerve centre – track materials, suppliers and logistics risks in real time to accelerate decision-making. By monitoring demand signals such as order volatility, leaders can refine responses.

• Build end-to-end exposure visibility – link inventory levels, supplier dependence and logistics exposure to identify availability and pricing risks across energy supply chains.

• Negotiate smartly with suppliers – leverage data transparency to assess justified price movements and maintain value chain alignment.

• Manage cost, continuity and cash – balance inflationary pressures using indexation and alternative sourcing.

• Plan for enduring volatility – maintain agility through worst-case scenario planning, relationship investments and rapid renegotiation.

Adapting to a new reality

Today’s disruption demands more than short-term fixes. Leaders must coordinate procurement, finance and operations to build resilience into the core of energy supply systems.

“Geopolitical shifts mean that the aspects of global trade that once made the system strong and resilient, now represent weakness and risk,” McKinsey says.

“Businesses need multitier visibility systems through which they can track input costs across value chains.

“Both scenario modelling and digital twins, for example, enable integrated, data-driven decision-making, and investing in them is long overdue for many organisations.”

Transparency and adaptability will determine how effectively the energy sector weathers the current storm.

Those equipped to think beyond procurement and embed energy resilience into strategy will sustain advantage even amid instability.