Bold claim: The Strait of Hormuz is a lifeline—and its potential disruption could unsettle the entire global energy system. And this is where the story gets more complex than most people realize...
DUBAI, United Arab Emirates — The widening conflict involving Iran has slowed tanker traffic through the Strait of Hormuz to a near standstill, and oil prices have risen as a consequence. This underscores the crucial role this narrow waterway plays in global energy flows.
The Strait of Hormuz is the narrow gateway at the mouth of the Persian Gulf, through which roughly one-fifth of the world’s oil passes. Tankers moving through this strait, bordered to the north by Iran, transport oil and gas from Saudi Arabia, Kuwait, Iraq, Qatar, Bahrain, the UAE, and Iran. A large share of that oil heads toward Asian markets.
Any disruption to traffic through the Strait of Hormuz can have widespread effects on the oil trade.
The stakes are enormous, says Hakan Kaya, a senior portfolio manager at Neuberger Berman. He notes that a partial slowdown lasting a week or two could be absorbed by oil companies, but a full or near-full closure lasting a month or more could push crude prices well into triple digits and push European natural gas prices toward or above levels seen during the 2022 crisis.
Here’s a concise overview of the Strait and the evolving Iran conflict.
A pivotal route for world shipping
The Strait of Hormuz is a curved waterway about 33 kilometers (21 miles) wide at its narrowest point, linking the Persian Gulf to the Gulf of Oman. From there, ships can access global trade routes. Although Iran and Oman claim territorial waters in the strait, it is widely regarded as international waters that ships from all nations may pass through. The United Arab Emirates, anchored by Dubai’s skyscraper skyline, sits adjacent to this waterway.
A long-standing trade corridor
Historically, the Strait of Hormuz has been a major trade artery, moving ceramics, ivory, silk, and textiles from China through the region. In modern times, it serves as the route for supertankers carrying oil and gas from Saudi Arabia, Kuwait, Iraq, Qatar, Bahrain, the UAE, and Iran. Most of this energy travels to Asia, with China remaining a key oil customer for Iran.
There are pipelines in Saudi Arabia and the UAE that can bypass the strait, but the U.S. Energy Information Administration notes that most volumes transiting the strait have few alternative exits from the region.
Past tensions have spiked energy prices globally
The risk to this chokepoint has historically sent energy prices higher, including during conflicts like the Israel-Iran tensions in June.
Is the strait closed?
Iran has attacked several ships and threatened to close the Strait of Hormuz, warning that any passing vessels could be set on fire.
The claim that the Strait is closed has been asserted by Iranian officials, notably Brig. Gen. Ebrahim Jabbari, a Revolutionary Guard adviser. He warned that ships passing through would be targeted.
Previously, Iran briefly shut down parts of the strait in mid-February for what it described as a military drill. In the days that followed, oil prices rose by about 6%.
Historically, Iran has at times harassed shipping through the narrows, and during the Iran-Iraq war of the 1980s, both sides attacked tankers and vessels, even using naval mines to halt traffic at points. Yet repeated, full closures have been rare since the 1980s, despite last year’s 12-day conflict when Israel and the U.S. struck Iran’s nuclear and military installations.
Global shipping activity has slowed
Major shippers have issued alerts and paused operations in the area. Maersk, the world’s largest shipping company, announced it would suspend all vessel crossings through the Strait of Hormuz until further notice. Other carriers such as Hapag-Lloyd, CMA CGM, and MSC issued similar advisories.
Experts warn of cascading disruptions
Industry analysts say insurers are reluctant to back shipments through the strait at present. Ships that were already in the Gulf may be unable to resume travel for the moment, and vessels en route to replace them are also being rerouted or anchored.
Kpler, a data and analytics firm, reported on Monday that about 70 laden oil tankers and 75 clean tankers (refined products) were in the Middle East Gulf waiting to pass through. That’s roughly double the typical number. Additionally, about 60 tankers were positioned just outside the Gulf, east of the Strait, in a holding pattern.
In sum, the Strait of Hormuz remains a critical, fragile artery for global energy flows, and tensions in the region continue to ripple through energy markets and shipping routes.
— Jon Gambrell and Mae Anderson, The Associated Press
