{ "id": "S03", "slug": "regional-war-spillover", "title": "A regional war closes a globally important sea route", "version": "0.5.0", "status": "active", "orientation": "downside", "family": "B", "short_title": "Regional war spillover", "thematics": [ "economic-security-supply-chains", "climate-energy-resources", "resilience-crisis-preparedness" ], "likelihood_type": "systemic", "likelihood_note": "Likelihood is for any theatre that meets the definition, not for a named strait.", "scores": { "likelihood_2y": { "band": 3, "rationale": "Deep closures have occurred, but the definition also requires six months of conventional warfare with a major power engaged and 90 days at a 70 per cent loss of traffic. The 2026 Hormuz episode came close on traffic; its fighting lasted weeks. Several theatres carry the risk independently, which holds the band at Possible and not Unlikely." }, "likelihood_10y": { "band": 4, "rationale": "Over ten years the test is whether any contested strait sees sustained warfare with a major power engaged. Disputes in the Gulf, the Taiwan Strait, the Red Sea and the Black Sea are unresolved, and long-range strike is now held by regional states and armed groups. Together they place the event in the Likely band. The six-month threshold keeps it below Highly likely." }, "impact_systemic": { "level": 4, "rationale": "Lloyd's range for a conflict that closes major trade routes runs from US$7.8 trillion to US$50 trillion over five years. A six-month war with a 90-day closure, doubled oil and fourfold gas sits above the weighted case and below the extreme one. Damage to export facilities and depleted stocks extend the loss beyond the closure." }, "impact_national": { "level": 4, "rationale": "A typical highly exposed nation rations fuel, funds subsidies and defence together, evacuates nationals and receives displaced people. Security and essential services reach Severe. The level stops short of Catastrophic because the war is bounded: no nuclear use, a ceasefire at six months and a route that reopens. Belligerents and single-route importers may exceed it." }, "confidence": { "level": "medium", "reason": "Traffic, price and insurance paths rest on observed closures in 2022 and 2026. The conduct and length of a war involving a major power, and the scale of displacement, are judgements." }, "priority": 12, "tier": "II", "source": "model-panel-v0.5" }, "scorecard": { "onset": "days", "duration": "90 days (closure; the war lasts six months)", "warning": "days (after months of visible tension)", "scope": "global", "origin": "adversarial (great power and partners)", "external_support": "partial", "policy_response": "current plans executed", "recovery_horizon": "years (traffic in months; facilities and stocks in years)" }, "summary": "A regional confrontation becomes six months of conventional warfare involving a major power and its partners. A globally important strait loses 70 per cent of normal commercial traffic for 90 days, followed by six months of partial recovery. Strikes and cyber operations damage nearby ports, energy facilities and communications. At the peak, oil prices are twice and gas prices four times their pre-war level, and war-risk insurance on affected routes triples. Nations must manage defence commitments, evacuation, displaced people and fuel rationing together. The test assumes neither rapid victory nor nuclear escalation. The Strait of Hormuz is the default theatre; other straits are variants.", "narrative": { "dateline": "March 2031", "text": "The confrontation had been building for months, but the war itself began within a week. In early April 2030 an exchange of strikes between a regional state and a major power with forces in the Gulf became a sustained air, missile and naval campaign, and two partner states joined within days. War-risk underwriters withdrew standard cover for the strait on the third day. Owners held ships outside it, and transits fell from about a hundred a day to fewer than thirty, most of them under escort.\n\nThe closure lasted 90 days at that level. Missiles and drones damaged two export terminals, a gas liquefaction plant and a container port. Cyber operations interrupted port systems and a regional telecommunications operator for several days at a time, and satellite navigation was unreliable across the theatre. Crude oil reached twice its pre-war price in the fifth week. Spot gas reached four times its pre-war price in the eighth, when buyers in East Asia, South Asia and Europe were bidding for the same cargoes. War-risk premiums on the affected routes tripled.\n\nGovernments faced several tasks at once. Importing states released emergency stocks in the second week and introduced fuel allocation for industry in the fourth; several then found that their plans assumed a closure of 30 days. States with nationals in the region ran evacuations by air and sea while commercial flights were suspended, and neighbouring countries received displaced people in numbers their reception systems had not planned for. Allied governments were asked for ships, air defence interceptors and basing. Interceptors and precision munitions were used faster than they could be made. Reservists were recalled in the belligerent states and in two of their partners.\n\nThe economic effects reached beyond the energy importers. Fertiliser prices followed gas. Freight rates rose on routes far from the fighting as ships were rerouted and insurers repriced. Central banks tightened policy against inflation that came from supply, and finance ministries funded fuel subsidies and defence orders in the same budget. Low-income importers in Africa and South Asia cut fuel and food purchases as their currencies fell. Exporters outside the theatre earned more, and so did some defence manufacturers.\n\nNeither side won quickly and neither used nuclear weapons. Large-scale operations continued until October 2030, when a ceasefire held. Mine clearance and the return of insurers and crews took longer: traffic through the strait recovered only in part over the following six months and had not returned to its pre-war level by March 2031. The damaged terminals were still under repair and emergency stocks were being rebuilt at higher prices. Munitions stocks were below their pre-war levels in every state that had fought or supplied.\n\nThe states that came through with least loss had more than one supply route, stocks sized for months, tested allocation and evacuation plans and forces able to sustain an escort commitment. The others had plans for a closure or for a war, but not for both together over six months." }, "anchors": [ { "shock_id": "hormuz-closure-2026", "date": "28 February to July 2026", "event": "Strait of Hormuz closure", "what_happened": "After strikes on Iran on 28 February, commercial shipping through the strait effectively halted from early March. War-risk premiums doubled and Brent rose above US$92 on 6 March. The first transits under a ceasefire took place on 8 April. On 2 July traffic stood at 34 transits a day against about 100 before the conflict.", "calibrates": "The traffic loss, the insurance path and the recovery horizon: about five weeks of closure produced four months of disruption. This scenario extends the fighting to six months." }, { "shock_id": "suez-canal-closure-1967", "date": "June 1967 to June 1975", "event": "Closure of the Suez Canal", "what_happened": "Egypt closed the canal at the start of the June 1967 war and it stayed shut until 5 June 1975. Fifteen merchant ships were trapped inside it for the eight years. Traffic between Europe and Asia was rerouted around the Cape of Good Hope.", "calibrates": "A war can close a sea route for far longer than the fighting lasts. Sets the upper bound on duration for the Standard Extreme setting and shows that trade adapts by rerouting at a cost." }, { "shock_id": "iran-iraq-tanker-war-1984", "date": "1984–1988", "event": "Iran–Iraq tanker war", "what_happened": "Iran and Iraq attacked merchant shipping in the Gulf over four years and several hundred vessels were hit. The strait was never closed. From July 1987 the United States Navy escorted reflagged Kuwaiti tankers.", "calibrates": "Sustained warfare beside a strait without closure: the Standard Major setting, and the escort burden that falls on outside navies." }, { "shock_id": "ukraine-2022", "date": "24 February 2022 onward", "event": "Russia's full-scale invasion of Ukraine", "what_happened": "A major power began a conventional war that many expected to be short; it continued for years. Ukraine's Black Sea ports were closed to commercial shipping until a grain corridor opened in July 2022. More than 5 million people had left the country by late April 2022. Artillery and air defence munitions were used faster than supporting states produced them.", "calibrates": "The assumption of no rapid victory, the speed and scale of displacement and the munitions and alliance load of a long conventional war." }, { "shock_id": "russian-gas-cut-off-2022", "date": "2022", "event": "Russian gas cut-off", "what_happened": "Russian pipeline gas deliveries to Europe fell sharply during 2022. The European benchmark gas price peaked near €340 per megawatt hour in August 2022, and European governments allocated hundreds of billions of euros to energy support.", "calibrates": "The gas price multiple and the fiscal cost of household and industrial support. A fourfold rise is within what has been observed." }, { "shock_id": "lloyds-geopolitical-conflict-scenario-2024", "date": "October 2024", "event": "Lloyd's geopolitical conflict scenario", "what_happened": "Lloyd's modelled a conflict that closes major trade routes. The five-year global loss was US$14.5 trillion on a probability-weighted basis, within a range of US$7.8 trillion to US$50 trillion.", "calibrates": "The systemic impact level: this scenario sits above the weighted case and below the extreme one." } ], "parameters": { "common": { "severity": { "major": "major", "severe": "severe", "extreme": "extreme" }, "duration": { "major": "30 days (closure; warfare for two months)", "severe": "90 days (closure; warfare for six months)", "extreme": "1 year (closure; warfare for 18 months)" }, "onset": { "major": "days", "severe": "days", "extreme": "days" }, "warning": { "major": "months", "severe": "days (after months of visible tension)", "extreme": "none" }, "scope": { "major": "regional", "severe": "global", "extreme": "global" }, "origin": { "major": "adversarial (neighbour)", "severe": "adversarial (great power and partners)", "extreme": "adversarial (great power and partners)" }, "external_support": { "major": "full", "severe": "partial", "extreme": "none" }, "concurrency": { "major": "standalone", "severe": "standalone", "extreme": "plus one named scenario (S04)" }, "policy_response": { "major": "current plans executed", "severe": "current plans executed", "extreme": "current plans executed" }, "recovery_horizon": { "major": "months", "severe": "years (traffic in months; facilities and stocks in years)", "extreme": "structural" } }, "specific": [ { "name": "Theatre and strait", "default": "Strait of Hormuz and the Gulf", "range": "options: Taiwan Strait and Luzon Strait / Malacca / Bab el-Mandeb and Suez / Turkish Straits / Baltic approaches", "unit": null, "note": "The price path below is calibrated to the default. An East Asian theatre replaces part of the energy loss with a loss of semiconductor and manufactured goods supply." }, { "name": "Duration of conventional warfare", "default": "6", "range": "2 to 18", "unit": "months", "note": "Large-scale operations involving a major power and its partners, ending in a ceasefire and not in a decisive result." }, { "name": "Loss of commercial traffic through the strait", "default": "70", "range": "40 to 100", "unit": "per cent of normal transits", "note": "Insurer withdrawal and owners' decisions account for most of the loss; a declared blockade is not required." }, { "name": "Duration of closure at that loss", "default": "90", "range": "30 to 365", "unit": "days", "note": "Followed by six months of partial recovery (range 2 to 18 months) while mines are cleared and insurers and crews return." }, { "name": "Oil price at the peak", "default": "2", "range": "1.5 to 3", "unit": "multiple of the pre-war price", "note": "Carried over from the first-pass energy supply scenario." }, { "name": "Gas price at the peak", "default": "4", "range": "2 to 6", "unit": "multiple of the pre-war price", "note": "Spot LNG and the benchmarks that follow it. Contracted pipeline gas moves less." }, { "name": "War-risk insurance on affected routes", "default": "3", "range": "1.5 to 10", "unit": "multiple of the pre-war premium", "note": "Where standard cover is withdrawn altogether, traffic depends on state-backed cover or escort." } ] }, "transmission": [ "Strikes begin and war-risk insurers withdraw cover. Commercial transits through the strait fall by 70 per cent within days.", "Crude, LNG and refined product cargoes stop arriving. Oil prices double and gas prices rise fourfold at the peak, with physical shortages for direct importers.", "Strikes and cyber operations damage ports, energy facilities and communications near the theatre, which extends the supply loss beyond the closure.", "Belligerents and allies commit forces, interceptors and munitions faster than industry replaces them. Governments evacuate nationals and receive displaced people.", "Freight and insurance costs rise on all routes. Fertiliser, petrochemical and component supplies tighten and food import costs rise.", "Inflation, subsidies and defence spending widen deficits. Central banks tighten, and the currencies and sovereign spreads of import-dependent states come under pressure.", "Importing governments ration fuel and release reserves. Public tolerance and alliance cohesion weaken as the war passes its third month.", "After a ceasefire, mine clearance, repairs and the return of insurers and crews take six months. Stocks and munitions are rebuilt at higher cost." ], "loading": [ { "dimension": "Hard", "domain": "defence-security", "load": "High", "channel": "combat operations, alliance commitments, escort and mine clearance, munitions use above production, evacuation of nationals" }, { "dimension": "Hard", "domain": "strategic-infrastructure", "load": "High", "channel": "strike and cyber damage to ports, energy facilities and communications; pipelines, storage and refining flexibility" }, { "dimension": "Hard", "domain": "critical-technology", "load": "Medium", "channel": "navigation interference, cable damage, demand for drone and missile defence, interrupted component shipments" }, { "dimension": "Soft", "domain": "government-effectiveness", "load": "High", "channel": "fuel rationing, reserve release, evacuation and reception of displaced people run concurrently" }, { "dimension": "Soft", "domain": "human-capital", "load": "Medium", "channel": "casualties, displacement, reservists leaving the workforce, health systems receiving evacuees" }, { "dimension": "Soft", "domain": "influence-cohesion", "load": "Medium", "channel": "alliance cohesion, public consent for commitments and rationing, information operations, alignment of non-belligerents" }, { "dimension": "Economic", "domain": "macro-financial", "load": "High", "channel": "inflation, current account, subsidy and defence spending, sovereign spreads and currency pressure on importers" }, { "dimension": "Economic", "domain": "industry-trade-supply", "load": "High", "channel": "freight and insurance costs, rerouting delays, input shortages, loss of export access" }, { "dimension": "Economic", "domain": "energy-resources", "load": "High", "channel": "crude, LNG and refined product shortfalls; strategic stock drawdown; fertiliser feedstock prices" } ], "stakeholders": { "government": { "exposure": "Alliance commitments, nationals in the theatre, import route concentration, reserve days and munitions stocks", "actions": [ "Write fuel allocation plans for a 90-day closure followed by six months of partial recovery", "Exercise evacuation, reception of displaced people and reserve release as concurrent tasks", "Agree escort, basing and munitions-sharing arrangements with partners before a crisis" ], "watch": [ "Force deployments and reserve call-ups in the theatre", "Daily transits and maritime security incident reports", "Emergency stock days and interceptor inventories" ], "relevance": 5 }, "technology": { "exposure": "Subsea cables, satellite navigation, regional data centres and component shipments routed through the theatre", "actions": [ "Map cable routes, landing stations and suppliers that depend on the theatre", "Secure backup power fuel and alternative routing for critical services", "Prepare for navigation interference and state-linked cyber operations against port and energy systems" ], "watch": [ "Satellite navigation interference reports", "Cable faults and repair-ship availability", "Diesel and component lead times" ], "relevance": 4 }, "investors": { "exposure": "Shipping, insurance, energy, airlines, defence producers and the sovereign debt of energy importers", "actions": [ "Stress portfolios on doubled oil, fourfold gas and tripled war-risk premiums over nine months", "Review war exclusions and accumulation across marine, aviation and political risk lines", "Assess sovereign exposure to importers with low reserves and high fuel subsidy costs" ], "watch": [ "War-risk premiums and changes to listed areas", "Tanker and LNG freight rates", "Sovereign spreads of energy importers" ], "relevance": 5 }, "public": { "exposure": "Fuel prices and availability, household energy bills, relatives in the region and reserve service", "actions": [ "Follow official travel advice and register with consular services when in the region", "Keep household preparedness in line with national guidance", "Rely on official allocation notices and not on unverified reports" ], "watch": [ "Travel advisories", "Pump prices and rationing announcements", "Reserve call-up notices" ], "relevance": 3 } }, "regions": [ { "region": "north-america", "exposure": "High", "rationale": "Alliance and partner commitments draw forces and munitions; net energy exports do not shield consumers from world prices." }, { "region": "europe", "exposure": "High", "rationale": "LNG, jet fuel and diesel imports; trade with Asia through Suez; allied obligations and arrivals of displaced people." }, { "region": "china", "exposure": "High", "rationale": "The world's largest crude importer, supplied through Hormuz and Malacca; a belligerent in the East Asian variant." }, { "region": "indo-pacific", "exposure": "High", "rationale": "Japan, Korea and Taiwan import most of their energy by sea; ASEAN straits and allied bases are exposed." }, { "region": "south-asia", "exposure": "High", "rationale": "Crude and LNG imports and remittances from the Gulf depend on the theatre; fiscal buffers are thin." }, { "region": "gulf-middle-east", "exposure": "High", "rationale": "Theatre of the default case: facilities struck, exports stopped, residents and migrant workers displaced." }, { "region": "africa", "exposure": "Medium", "rationale": "Fuel, food and fertiliser import costs rise and East African freight is disrupted; some oil exporters gain." }, { "region": "latin-america", "exposure": "Medium", "rationale": "Distant from the fighting; importers pay more for fuel and fertiliser while oil and grain exporters gain." }, { "region": "russia-eurasia", "exposure": "High", "rationale": "Exporters gain on price, but Black Sea and Baltic variants place the region in the theatre and transit routes are disrupted." } ], "indicators": [ { "name": "Daily commercial transits by strait", "source": "IMF PortWatch; Lloyd's List Intelligence", "threshold": "30 per cent below the 12-month average for seven days", "cadence": "daily" }, { "name": "Attacks on and seizures of merchant vessels", "source": "UK Maritime Trade Operations (UKMTO)", "threshold": "three or more incidents in 30 days in one theatre", "cadence": "daily" }, { "name": "War-risk listed areas and premium as a share of hull value", "source": "Lloyd's Market Association Joint War Committee", "threshold": "a new listed area, or premiums at twice the level of 90 days earlier", "cadence": "weekly" }, { "name": "Brent crude and spot LNG benchmark prices", "source": "US Energy Information Administration; ICE", "threshold": "Brent 30 per cent above its 90-day average", "cadence": "daily" }, { "name": "Emergency oil stocks in days of net imports", "source": "International Energy Agency", "threshold": "below 90 days", "cadence": "monthly" }, { "name": "Armed conflict events and cross-border strikes in the theatre", "source": "ACLED", "threshold": "a rise sustained over four weeks", "cadence": "weekly" }, { "name": "Cross-border displacement from the theatre", "source": "UNHCR Operational Data Portal", "threshold": null, "cadence": "weekly" }, { "name": "Force deployments, reserve call-ups and advice to nationals to leave", "source": null, "threshold": "departure advice issued by three or more governments", "cadence": "weekly" } ], "compounds": { "triggers": [ { "id": "S02", "note": "Energy-driven inflation, tighter policy and war spending raise sovereign spreads for importers" }, { "id": "S06", "note": "Fertiliser shortages and freight costs reduce the availability of staple imports" }, { "id": "S01", "note": "Sanctions and export controls between the belligerents' partners harden into blocs" }, { "id": "S04", "note": "A belligerent extends cyber operations and sabotage to the infrastructure of supporting states" }, { "id": "S09", "note": "A major power at war has the strongest reason to use or reveal a concealed capability." }, { "id": "S10", "note": "War and displacement remove surveillance and care, so an emerging pathogen spreads before detection." }, { "id": "S13", "note": "A war that closes a sea route shows both powers the cost of unmanaged escalation" }, { "id": "S14", "note": "A costly closure of a sea route forces the parties and guarantors to negotiate" }, { "id": "S15", "note": "a fuel price shock accelerates the move away from imported hydrocarbons" } ], "triggered_by": [ { "id": "S04", "note": "A campaign below the threshold of war escalates into open warfare" }, { "id": "S01", "note": "Division of trade into blocs removes the commercial restraint on confrontation" }, { "id": "S05", "note": "A disputed transfer of power in a state beside the strait invites intervention" }, { "id": "S06", "note": "Disputes over shared rivers and scarce grain raise the risk of armed confrontation between neighbours; a contributing cause only." } ], "amplified_by": [], "triggered_by_other": [ "An incident at sea or in the air between forces operating in close contact", "The collapse of a ceasefire or of agreed limits on missile and nuclear activity in the region" ], "amplifying_trends": [ "Great-power competition", "Long-range strike proliferation", "Contested maritime access", "Energy import dependence", "Defence industrial base & munitions", "Drone & autonomous warfare", "Asylum & migration system strain", "Strategic stockpiles & reserves" ] }, "open_questions": [ "Whether one record can hold both a Gulf war and a Taiwan Strait war. The second involves two major powers directly and removes semiconductor supply, which the energy price path does not describe.", "The specification gives no figure for displaced people, evacuated nationals or facility damage, so three of the loads rest on judgement and not on a stated parameter.", "One panel member rated national impact at 5. Whether belligerents and single-route importers should be scored apart from the typical highly exposed nation.", "How to treat energy exporters whose revenue stops because they are inside the theatre, as against exporters outside it that gain." ], "commentary": null, "overview": { "source": "model-panel-v0.5", "lenses": { "political": "Allied governments are asked for ships, interceptors and basing while **neither side wins quickly**. Alliance cohesion is tested past the third month.", "economic": "**Oil doubles and gas rises fourfold** at the peak. War-risk insurance triples and central banks tighten against supply-driven inflation.", "social": "Governments run **evacuation, reception of displaced people and fuel rationing** together. Reservists are recalled in belligerent and partner states.", "technological": "Drones, missiles and cyber operations damage ports and communications. **Interceptors are used faster than they are made**.", "legal": "**War-risk underwriters withdraw cover** within days. Sanctions, neutrality and freedom of navigation are contested throughout.", "environmental": "Strikes on terminals and tankers put **enclosed waters at risk of oil spills**. Importers burn more coal while gas is short." }, "regions": { "north-america": "**Forces and munitions are committed** under alliance obligations. Net energy exports do not shield consumers from world prices.", "europe": "**LNG, jet fuel and diesel** run short and trade with Asia is rerouted. Allied obligations and displaced people add to the load.", "china": "The **world's largest crude importer** loses Gulf supply, and is a belligerent in the East Asian variant.", "indo-pacific": "Japan, Korea and Taiwan **import most of their energy by sea** and ration industrial users within weeks.", "south-asia": "**Crude, LNG and Gulf remittances** all depend on the theatre, and fiscal buffers are thin.", "gulf-middle-east": "The theatre of the default case: **facilities are struck and exports stop**, and residents and migrant workers are displaced.", "africa": "Rated Medium: **fuel, food and fertiliser costs** rise and East African freight is disrupted, while some oil exporters gain.", "latin-america": "Rated Medium: **distant from the fighting**. Importers pay more for fuel and fertiliser; oil and grain exporters gain.", "russia-eurasia": "Exporters gain on price, but **Black Sea and Baltic variants** place the region in the theatre." }, "evolution": { "lead_indicators": "Forces deploy, reserves are called up and **three or more governments advise nationals to leave**. Attacks on merchant vessels recur and war-risk premiums double within 90 days.", "triggers": "After months of visible tension, an exchange of strikes between a regional state and a major power becomes **sustained conventional warfare** within a week. Partner states join within days.", "immediate": "War-risk underwriters withdraw cover on the third day and **transits fall 70 per cent**. Importing states release emergency stocks in the second week and governments begin evacuating nationals.", "post_immediate": "During the 90-day closure oil reaches **twice and gas four times** its pre-war price. Fuel is allocated to industry, fertiliser and freight costs rise and central banks tighten.", "stabilisation": "A ceasefire holds after six months of war. Traffic **recovers only in part over the following six months** while mines are cleared and insurers and crews return.", "long_term": "Export terminals and emergency stocks take **years to restore**, at higher prices. Munitions stocks remain below pre-war levels in every state that fought or supplied." } }, "history": [ { "edition": 2027, "rank": 3, "L2y": 3, "L10y": 4, "impact_systemic": 4, "impact_national": 4, "confidence": "medium" } ], "changelog": [ { "version": "0.5.0", "date": "2026-10-09", "change": "Rebuilt in the second pass from Maritime chokepoint closure: the event is now a six-month regional war involving a major power, with the strait closure and the price path of the first-pass Energy supply shock inside it. Likelihood bands lowered from 4 and 5 to 3 and 4, and national impact from 5 to 4." } ], "citation": "GINC (2027). Scenario S03 A regional war closes a globally important sea route, Scenario Library v0.5. scenarios.ginc.org/scenarios/regional-war-spillover" }