Iran Closes Strait of Hormuz, Global Oil Crisis Looms

Iran’s parliament has called on the government to close the Strait of Hormuz in response to the death of Supreme Leader Ayatollah Ali Khamenei during recent escalation involving the United States and Israel. The world is now closely monitoring the possibility of Iran implementing this closure. Iran’s parliament has reportedly supported this measure, though the final decision will depend on approval from Iran’s national security council.

If realised, this action would be the first time Iran has undertaken such a closure since the conflict with Israel began in 1979. The Strait of Hormuz is one of the world’s most strategically important maritime routes, serving as the passage for approximately one-fifth of global oil and gas supply.

The Islamic Republic of Iran is currently at its closest position to taking action to close the Strait of Hormuz. Previously, some analysts were sceptical of similar threats because historically Iran has preferred measured approaches. However, the recent incident targeting their supreme leader has the potential to change this approach and push Tehran to take action with greater impact on the global economy.

The Strategic Importance of the Strait of Hormuz

The Strait of Hormuz is only about 33 kilometres wide. Despite its small size, the strait serves as a vital link between the oil-rich Persian Gulf and the rest of the world. This makes it one of the busiest and most strategically important maritime routes on Earth.

Approximately 22%, or nearly a quarter, of the world’s oil supply passes through the Strait of Hormuz. Approximately 20% of global liquefied natural gas (LNG) trade also passed through the Strait of Hormuz in 2022.

Beyond oil, the strait is also used to transport liquefied natural gas (LNG), petrochemicals, and other essential goods.

The security and stability of this route are crucial to ensuring global trade continues smoothly. If the strait is blocked or disrupted, the consequences could be extremely serious for global energy prices, supply chains, and economies worldwide.

Geopolitical Tensions Surrounding the Strait

The Strait of Hormuz borders several countries, each with its own interests and influence in the region.

To the west are the United Arab Emirates and Oman, whilst Iran controls the northern coastline, and Saudi Arabia and Bahrain are on the opposite side. Its proximity to powerful nations and vital resources makes the Strait of Hormuz a centre of geopolitical tension.

The strategic importance of the strait has created various political and military challenges over the years. Iran, which controls most of the northern coastline, frequently threatens to block the strait during times of conflict.

For example, in 2019, when tensions between Iran and the US peaked, Iran seized tanker ships passing through the strait. This action, along with other military confrontations in the region, triggered global concerns about the security of the route and its impact on the world oil market.

Security Challenges and Military Presence

The Strait of Hormuz has become the focus of regional security issues. Because of its importance in global oil transportation, any threat to the strait could quickly escalate into an international crisis.

Both the US and Iran have deployed military forces in the region, and tensions often escalate when military operations take place around the strait.

In recent years, military presence in the region has increased.

The US Navy, together with other NATO members, frequently patrols the strait to ensure shipping lanes remain open. Additionally, the UAE and Saudi Arabia maintain military presence to protect their oil facilities and infrastructure.

However, this high concentration of forces also raises concerns. The more military forces in the region, the greater the risk of conflict.

Iran, for instance, has repeatedly threatened to close the strait if military action is taken against it. Should this occur, the world could face a global oil crisis, as countries dependent on Gulf oil would need to find alternative routes.

Facts About the Strait of Hormuz:

• The Strait of Hormuz is located between Oman and Iran, connecting the Persian Gulf with the Gulf of Oman and the Arabian Sea.

• The strait is the world’s most important oil chokepoint as it serves as the main route for global oil flow.

• In 2022, an average of 21 million barrels per day (bpd) of oil flowed through the Strait of Hormuz. This volume is equivalent to approximately 22% of global petroleum liquid consumption.

• Between 2020-2022, the volume of crude oil, condensate, and petroleum products [continued].

• Approximately 82% of crude oil and condensate passing through the Strait of Hormuz in 2022 was shipped to Asian markets.

• China, India, Japan, and South Korea are the four primary destination countries, absorbing 67% of all oil and condensate passing through the Strait of Hormuz in 2022 and the first half of 2023.

Is There a History of Ship Attacks?

During the Iran-Iraq War in the 1980s, both countries routinely threatened each other’s oil shipments.

In 1988, the US Navy warship Vincennes shot down an Iranian passenger plane, killing 290 people in what Washington described as an accident.

In 2010, a Japanese oil tanker was attacked by a group affiliated with al-Qaeda.

Has Iran Ever Closed the Strait of Hormuz?

Iran has never actually closed the Strait of Hormuz in modern history, despite repeatedly threatening to do so.

The Strait of Hormuz is also a vital route for Iran’s own economy, as most of Iran’s oil exports pass through the strait.

Closure of the strait could trigger open war with the US and its allies, which have significant military power in the Gulf region. To date, Iran has more often chosen alternative actions such as limited strikes, tanker sabotage, or navigation disruptions.