The escalating conflict between Israel and Iran has sparked significant concerns regarding the potential for Iran to retaliate by attempting to close the Strait of Hormuz. This strategic waterway is recognized as one of the world's most critical oil chokepoints, with vast volumes of crude oil transiting through it daily. Following a recent military strike by the U.S. on three Iranian sites, questions arise about how Iran might respond militarily to safeguard its interests.
The Strait of Hormuz lies between Oman and Iran, featuring a narrow passage that is only 33 kilometers (21 miles) wide at its tightest point. Despite its width, it is deep and wide enough to accommodate the largest crude oil tankers in the world. Approximately 20 million barrels of oil per day, which represents around 20% of global oil consumption, flowed through this vital waterway in 2024. The majority of this oil is destined for Asian markets.
Oil transported through the strait originates from several countries, including Saudi Arabia, the United Arab Emirates, Iraq, Iran, Kuwait, and Bahrain. Additionally, significant quantities of liquefied natural gas come from Qatar. The sea lanes for tankers primarily navigate through Omani waters before entering Iranian territory, making the strait a critical energy corridor.
If Iran were to close the Strait of Hormuz, the repercussions on global oil prices would be immediate and severe. Analysts predict that oil prices could surge to between $120 and $130 per barrel temporarily, leading to an inflationary shock to the global economy. The impact would be most pronounced in Asia, where 84% of the oil transported through the strait is headed. Key destinations include China, India, Japan, and South Korea.
China, in particular, relies heavily on oil from this region, sourcing 47% of its seaborne oil from the Gulf. However, it should be noted that China possesses an extensive oil inventory of 1.1 billion barrels, which can sustain its supply for approximately two and a half months. In contrast, the U.S. has been less reliant on oil imports from the Persian Gulf, sourcing only about 7% of its oil from countries in this region, the lowest level in nearly 40 years.
While the idea of closing the strait may seem appealing to Iran, doing so would also severely impact its own oil exports. Despite constructing a new terminal at Jask, located outside the strait, this facility has yet to be fully operational and cannot compensate for the volume of oil that normally transits through the strait. Blocking the strait would not only hinder Iran's exports but also negatively affect its largest trading partner, China, and its oil-exporting Arab neighbors who have shown support for Iran amid its conflict with Israel.
Experts believe that any spike in oil prices resulting from a closure of the Strait of Hormuz would be short-lived. A significant factor in this expectation is the potential for U.S. military intervention. Historically, the U.S. Navy has taken measures to ensure the safety of shipping in the strait, as demonstrated during the Iran-Iraq War in the 1980s when U.S. warships escorted Kuwaiti oil tankers to protect them from Iranian threats.
Analysts suggest that if the strait were to be blocked, the U.S. Navy would likely act swiftly to reopen it, a move that would probably receive support not only from Europe but also unofficial backing from China. The Iranian navy, under such circumstances, could face severe damage in a matter of hours or days.
The Strait of Hormuz remains a pivotal artery for global oil supply, and the ongoing tensions between Israel and Iran could have far-reaching implications for international markets. As the situation evolves, the potential for military action and its consequences for both regional stability and the global economy will continue to be closely monitored.
