As the United States directly intervened in the war between Israel and Iran by attacking Iran’s nuclear facilities, there is an increasing possibility that Iran will block the Strait of Hormuz, the world’s major crude oil transportation route and ‘bottleneck’.
The Strait of Hormuz is about 160km long and only about 50km wide at its narrowest point, but it is the only sea route connecting the Persian Gulf to the ocean and has enormous geopolitical importance.
According to a report recently released by the U.S. Energy Information Administration (EIA), the daily average oil transport through the strait is expected to be 20 million barrels by 2024, accounting for about 20% of global oil consumption. This amount of transport has not changed much since the first quarter of this year.
Compared to the global maritime oil transport volume, about a quarter of the total transport volume passes through this strait. In the case of liquefied natural gas (LNG), a fifth of the global maritime transport volume passes through this strait.
Most of the crude oil passing through this strait is destined for Asian markets, including Korea, China, Japan, and India.
In a recent report, KOTRA (Korea Trade-Investment Promotion Agency) analyzed that 99% of Middle Eastern crude oil coming to Korea passes through this strait. It is generally assessed that the Strait of Hormuz is relatively easy for Iran to blockade due to its geographical characteristics.
The Strait of Hormuz is relatively shallow, so the sea route that large oil tankers can pass through is limited, and since most of these large vessels must pass through Iranian territorial waters, Iran effectively controls the strait.
Ships transiting the strait are particularly vulnerable to mine attacks due to its shallow waters, and its proximity to the Iranian coastline makes it vulnerable to missile attacks, small patrol boats, and helicopters.
According to a New York Times report, Iran has several “limpet mines” that divers attach directly to the hull of a target ship; “moored mines” that use buoyancy and gravity to stay just below the water’s surface and explode upon contact; and the latest “sunk mines” that sink to the seabed and surface when a target approaches and explode. However, during the Iran-Iraq War in the 1980s, there was a threat to navigation through the Strait of Hormuz due to Iranian attacks on oil tankers and mine installations, but it never led to a full-scale blockade.
In the early 2010s, there were concerns about the blockade of the Strait of Hormuz during the Western sanctions against Iran, including the US, but they did not materialize. However, the recent war between Israel and Iran and the US airstrikes are different from the past, and there are growing concerns that the risk of the strait being blocked could become a reality.
In fact, the Iranian parliament (Majlis) voted on the 22nd to block the Strait of Hormuz in response to the US bombing of Iran’s nuclear facilities. The final decision-making authority on blocking the strait lies with the Supreme National Security Council (SNSC), but as Iran has been pursuing retaliatory measures following the US airstrikes on Iran’s nuclear facilities, the situation has effectively become a tense crisis that could lead to a full-scale blockade.
Economic experts are expressing serious concerns about the possibility of blocking the Strait of Hormuz, saying that if the Strait of Hormuz is blocked, international oil prices will surge, which will have a negative impact on the global economy.
International oil prices have surged by more than 10% since Israel attacked Iran’s nuclear facility. The general outlook of Wall Street experts is that if the oil tanker route is blocked, oil prices will rise even more steeply. Citigroup predicted in a recent report that “any form of blockade of the Strait of Hormuz could lead to a sharp increase in oil prices,” and predicted that if the strait is blocked, Brent crude could rise to around $90 per barrel. However, it predicted that even if the blockade were to occur, it would be short-lived and unlikely to be a long-term blockade.
Considering the political and economic blow to Iran if the Strait of Hormuz is closed, some analysts say that it is unlikely that the blockade will become a reality.
Stephen Schock, CEO of Schock Group, said in a Bloomberg interview that “I don’t think Iran will block the Strait of Hormuz because it could harm India and China, Iran’s two largest oil export customers.”
Vice President JD Vance also agreed with this view in an NBC interview that day, saying about the possibility of blocking the Strait of Hormuz, “It would be suicidal for the Iranians,” and “Iran’s entire economy relies on the Strait of Hormuz. I think that (closing the strait) makes absolutely no sense.”
Given that Iran’s economy is heavily dependent on oil exports through the Strait of Hormuz, it is assessed that the Iranian economy will not be able to withstand if this export route is blocked.
Meanwhile, the U.S. Energy Information Administration assessed that major oil exporting countries in the Middle East have been preparing alternatives to reduce their dependence on oil transportation through the Strait of Hormuz.
Saudi Aramco, the state-owned oil company of Saudi Arabia, has a pipeline connecting the Red Sea and the Persian Gulf, securing an oil transport route that bypasses the Strait of Hormuz.
The United Arab Emirates (UAE) also has a pipeline that can send oil directly to an export port in the Gulf of Oman without going through the Strait of Hormuz. However, Bloomberg analyzed that other major oil-producing countries in the Middle East, such as Kuwait, Qatar, and Bahrain, have no other option to export oil without going through the Strait of Hormuz.
In the case of Iran, a party to the dispute, an export port that can export oil from the Gulf of Oman without going through the Strait of Hormuz was opened in July 2021. However, the EIA assessed that the effective capacity of the pipeline is only about 300,000 barrels per day. Meanwhile, the United States, a major global oil-producing country, has a low dependence on oil passing through the Strait of Hormuz.
According to the EIA, the U.S. imported about 500,000 barrels of crude oil and liquefied natural gas per day through the Strait of Hormuz last year. This is about 2% of the total U.S. oil consumption.
However, as concerns about stagflation (economic slowdown with rising prices) in the U.S. grow due to the aftermath of the Donald Trump administration’s tariff policy, if oil prices rise further due to heightened tensions in the Middle East, concerns about inflation and the economy could grow even more.