Energy planners built their worst-case models around a scenario they considered impossible: a complete shutdown of the Strait of Hormuz. That assumption is now being tested in real time, exposing a blind spot in how the world prepares for catastrophic disruptions.
The strait controls roughly one-fifth of global oil and liquefied natural gas flows. No other single point in the energy system carries comparable weight. Yet in two major exercises designed to stress-test energy security, experts deliberately excluded a total closure from their modeling.
In 2007, a team led by the nonprofit Securing America's Energy Future reached that decision early. "The idea was laughed out of the room," said Sam Ori, who participated in that exercise. "The view was that it just wasn't credible and would be seen as alarmist." Fifteen years later, a 2022 task force convened by the International Energy Agency faced the same choice and reached the same conclusion: don't model it.
The reasoning differed slightly. IEA task force member Landon Derentz explained that planners rejected a full closure for two reasons. One, it had never occurred. Two, the consequences were deemed so massive that no single institution could devise a meaningful response. "It would require, at that point, a global response and scale of diplomacy that extended significantly past what is within the bandwidth of the IEA," Derentz said.
This pattern reflects what Harvard economist Martin Weitzman called the "dismal theorem." Low-probability catastrophes can overwhelm standard analytical frameworks and fall outside normal policy planning altogether. The risk becomes too large and improbable to plan around, so planners simply ignore it.
The disconnect between strategic models and actual risks has real consequences. In 2007, a partial disruption drove oil to $165 a barrel over the course of a year. Today's closure is only two months old, yet crude has already crossed $126 a barrel. Ori noted the difference: "If this goes on for another three months, people's view of that is going to change."
Some officials pushed back on the portrayal of a planning failure. An IEA spokesperson and a former senior IEA official both said the agency has long factored Strait of Hormuz closure risks into emergency planning, including analysis conducted in 2019. The 2022 task force, they argued, was a separate exercise focused narrowly on how countries could deploy existing strategic reserves, not a comprehensive threat assessment.
Yet even supporters acknowledged a fragmentation in how risks are evaluated. Military planners have extensively modeled conflict scenarios around the strait, but typically in isolation from energy economists and policy specialists. That separation meant different communities reached different conclusions about the same geography.
The world has also shifted in ways that make older models feel obsolete. TotalEnergies CEO Patrick Pouyanné recently noted that planners may have underestimated closure risks because the Strait of Hormuz is open water, not a controlled canal like Suez or Panama. "Anybody can navigate it," Pouyanné said. Energy expert Daniel Yergin, who participated in the 2007 exercise, added another wrinkle: "It was before drones. A cheap drone can now do enormous damage to a very large oil tanker."
The United States has some insulation its peers lack. Higher fuel efficiency standards and domestic oil and natural gas production have reduced American dependence on imports. Other nations lack that cushion. A prolonged closure would reshape global energy markets and economic expectations in ways that existing playbooks never contemplated.
The current crisis is forcing a reckoning not just with energy markets but with the assumptions embedded in how extreme risks get planned for in the first place. Who decides what scenarios are too improbable to model? And what gets missed when institutions avoid conversations about catastrophes they consider unmanageable?
Author James Rodriguez: "The straits just closed and all the models suddenly became outdated. That should scare energy planners a lot more than the closure itself."
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