The War in Iran is everyone’s problem
Ten weeks in from the start of the war and the Strait of Hormuz is still closed. Shipping is running at five per cent of pre-war volumes. The International Maritime Organisation reports that there are 20,000 sailors stranded on 2,000 vessels and says there is no precedent for this in the modern age.
The ceasefire is holding just enough to avoid all-out war and failing entirely to resolve anything else. Iran’s counter-proposal last Sunday demanded compensation, sovereignty over the Strait, an end to the US blockade, and the lifting of sanctions. Trump rejected it and the price of oil went up again.
This is the operating environment for Australian boards right now. Not a tail risk. Not a scenario. The actual situation.
The Strait Remains Closed
Iran does not need to win a naval battle to keep the Strait closed. It needs to make insurers nervous. The dual blockade situation, Iran blocking commercial traffic, the US blockading Iranian ports, suits neither side economically, but Iran can sustain its position asymmetrically at far lower cost. When Project Freedom launched on 4 May, two US-flagged vessels got through. Then Iran fired cruise missiles and drones with the UAE under attack two nights running, and by Tuesday evening Trump had paused the operation.
Baker Hughes has built its financial guidance around the Strait not fully reopening until the second half of 2026. A Dallas Fed survey found nearly 80 per cent of oil and gas executives agree. Even after physical reopening, analysts warn that the mine clearance backlog, damaged infrastructure, and insurer caution will keep risk premiums elevated for months. Brent crude is up more than 50 per cent since February and trading around over USD$110 a barrel.
Oil, LNG, and Fertiliser: Where Things Stand
The IEA has called this the largest supply disruption in the history of the global oil market. Fourteen and a half million barrels a day of production shortfall. LNG spot prices in Asia up over 140 per cent. Qatar’s damaged Ras Laffan LNG facility will take three to five years to fully repair.
Fertiliser is the issue that has not received enough public attention. The Gulf produces nearly half the world’s urea and 30 per cent of global ammonia. About a third of the world’s traded fertiliser normally passes through the Strait. Urea prices are up 50 per cent. Almost one million metric tonnes of fertiliser cargo is physically stranded in the Gulf. For Australian grain farmers, the June to August window for wheat and barley is weeks away. That window to spread fertiliser determines final yield. GrainGrowers has been explicit about the risk.
The Australian government’s $7.2 billion emergency fuel and fertiliser package, announced in this week’s budget, is the clearest signal to any board that has not yet treated this as a first-order strategic issue: the window for preparation is closing.
What This War Has Actually Cost
In late April, the Pentagon confirmed that Operation Epic Fury has cost the United States approximately USD$25 billion. Mostly munitions, operations and maintenance and equipment replacement. Thirteen American service members killed and four hundred wounded.
Democratic leaders and economists put the true economic cost to the United States at up to USD$1 trillion with higher energy costs, the macroeconomic drag, and the damage to US bases that the Pentagon has not yet fully costed included.
Senator Mark Kelly, who sits on the Armed Services Committee, said the depth of munitions depletion he learned about in classified Pentagon briefings was shocking. Kelly said: “this president got the country into this without a strategic goal, without a plan, without a timeline. The munitions magazines are depleted. Whether it is a conflict in the western Pacific or somewhere else, the US is less able to respond quickly than it was in January.”
For Australian boards doing geopolitical scenario planning beyond the Middle East, that last point matters.
What Boards Should Be Doing Right Now
1. Financials
Rebase your planning assumptions. Economists and analysts say the Strait will reopen in the third quarter of this year. If your financial model still assumes May or June, it is likely wrong. Run the numbers against a scenario where closure continues through September. If that scenario threatens business headroom or liquidity, your board needs to know before management brings you a problem.
Quantify total exposure, not just input costs. The Pentagon’s USD$25 billion versus $1 trillion estimate gap is a governance lesson. Direct fuel and fertiliser cost increases are visible. Consumer demand lessening due to inflation, working capital pressure from extended lead times, and insurance gaps are not. Make sure the full picture is on the table.
2. Supply Chain and Inventory
Know the numbers. If your organisation still runs on just-in-time logic for fuel, fertiliser, or any input with Gulf exposure, that needs to change. Boards should require specific numbers: days of fuel on hand, fertiliser stock position, lead times by supplier. Not qualitative updates.
Check insurance policies and force majeure. War risk exclusions on Persian Gulf transits are active. Standard travel insurance excludes war losses. Supply and logistics contracts may have force majeure clauses that have been triggered. This requires legal and insurance review at board level, not management assurance.
3. Disclosure and process
Review ASX disclosure obligations at every meeting. Materiality assessments that were adequate in March may not be adequate now. Get specific legal advice. Do not rely on management’s judgement that current disclosures are sufficient.
Ensure geopolitical risk is on the agenda, every meeting. Directors who understand the dynamic and the variables your organisation’s planning assumptions depend on make better decisions. A briefing from an external adviser is justified for any board with material exposure.
Where This Leaves Us
The stalemate over the Strait is not being resolved on Trump’s timeline. Iran has demonstrated it does not need to win to close one of the world’s most important waterways. The gap between the Pentagon’s USD$25 billion direct cost figure and the economists’ USD$1 trillion estimate tells you how much wider the consequences of geopolitical disruption are than their headline numbers suggest. Australian organisations are experiencing the same dynamic.
The boards governing well through this are the ones that have moved from monitoring to accountability. They know their exposure in specific numbers. They have tested their financials against the adverse scenario. They have briefed their stakeholders honestly. They are not waiting for certainty that is not coming.
The GFC taught us about capital under stress. COVID taught us about supply chains under pressure. The 2026 Iran war is teaching us that geopolitical risk is no longer a background condition. It is a primary strategic variable, and governing through it is now core to what it means to be a director.
The Strait will reopen. The question is whether your organisation has been governed well enough to be in a position of strength when it does.
About: Gary Morgan is a director, board advisor and principal consultant at MPT Innovation Group, specialising in governance, technology strategy, and organisational transformation for private and not-for-profit organisations. He is a Fellow and Member of the Queensland State Council of the Governance Institute of Australia, and an Adjunct Fellow and Member of the Griffith University Industry Advisory Board for the ICT School. Gary publishes regularly on board governance, AI, technology, and cybersecurity.
Acknowledgment: This article represents the author’s independent views and incorporates AI-assisted research and drafting.
References and Sources:
Military Times. (2026, April 29). Iran War Has Cost $25 Billion So Far, Pentagon Official Says.
UN trade & development (UNCTAD). (2026, March). Strait of Hormuz Disruptions: Implications for Global Trade and Development.
Discovery Alert. (2026, March). Australia Urea Risk: US-Iran War Threatens Topdressing.
Al Jazeera. (2026, April 30). $25bn or $1 Trillion: How Much Has Iran War Really Cost the US?
Al Jazeera. (2026, May 5). Oil Prices Surge as Violence Flares in Strait of Hormuz.
CBS News. (2026, May). Sen. Mark Kelly on Pentagon Budget and Munitions Depletion.
CNBC. (2026, April 24). Strait of Hormuz May Not Fully Reopen Until Second Half of 2026, Baker Hughes Says.
CNBC. (2026, May 5). U.S. says ‘Project Freedom’ will reopen Hormuz Strait for commerce. Experts are skeptical.
Bloomberg. (2026, May 6). Australia Eyes $7.2 Billion for Fuel Reserve After Supply Scare.
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