The escalating tensions between Israel and Iran have sparked fears that Iran may attempt to disrupt the global oil market by closing the Strait of Hormuz, a critical maritime route for oil transportation. This strait is a strategically vital channel, as it facilitates the movement of significant quantities of crude oil daily.
Recent U.S. military strikes on Iranian sites have fueled speculation about potential Iranian military responses. The Strait of Hormuz, situated between Oman and Iran, is highly vulnerable due to Iran’s capability to deploy fast-attack boats, naval mines, and missiles which can potentially obstruct the strait temporarily. Furthermore, the Iranian naval headquarters located in Bandar Abbas on the strait’s northern edge, along with the potential missile threat from Iran’s coastlines, adds to regional instability. In 2024, around 20 percent of the world’s oil supply, equating to 20 million barrels per day, transited through this vital waterway, with the bulk heading towards Asian markets.
This narrow passage, which links the Persian Gulf with the Gulf of Oman and the Arabian Sea, is critically important given its depth and width, making it suitable for the world’s largest oil tankers. Oil channeled through the strait originates from key producers, including Saudi Arabia, the United Arab Emirates, Iraq, Iran, Kuwait, and Bahrain. Additionally, significant liquefied natural gas supplies come from Qatar. Due to its unique geographical position, primarily within Omani and Iranian waters, alternate routes for transporting oil that bypass the Strait of Hormuz are not feasible without considerable cost increases.
In the event of a blockade, experts predict a sharp, though potentially short-lived, surge in oil prices, potentially soaring to $120-$130 per barrel. This situation would deliver a significant inflationary impact globally; however, sustained effects might be unlikely as many anticipate quick resolution efforts. Asia, predominantly reliant on these oil imports, with 84% of the oil traversing the strait destined for this region, would be directly affected. China, India, Japan, and South Korea are principal importers, with China relying on the Gulf for 47% of its seaborne oil.
Despite the potential for significant disruption, there are compelling reasons against Iran closing the strait. Such an action would jeopardize Iran’s own oil exports. While Iran has developed a terminal at Jask beyond the strait, its current capabilities are insufficient for fully substituting the strait’s operation. Additionally, this move could strain relations with China, Iran’s primary trade partner and oil customer, as well as with its Arab neighbors who are tacitly aligned with Iran in its conflict against Israel.
Moreover, closing the strait would infringe upon Oman’s sovereignty, a nation that has historically mediated Iran-U.S. tensions. Should Iran block the Strait of Hormuz, global economic equilibrium would face immediate disruption. Nonetheless, the United States, backed by European and possibly informal Chinese support, might intervene to restore passage swiftly. Historical precedents, such as U.S. naval escorts for tankers during the 1980s Iran-Iraq war, highlight the likelihood of rapid military involvement to ensure trade continuity. Analysts suggest that any naval confrontation would be short-lived, with the United States potentially overpowering Iranian maritime forces swiftly.