Strait of Hormuz: Why It’s Vital for Global Oil Supply

The Strait of Hormuz is far more than just a narrow stretch of water; it’s a critical artery for the world’s energy supply, a choke point whose stability is paramount to the global economy. Located between Iran and Oman, this strategic waterway connects the oil-rich Persian Gulf to the Gulf of Oman and the wider Arabian Sea. Its significance is underscored by the immense volume of crude oil, natural gas, and other fuels that transit its waters daily.

Recent geopolitical tensions, particularly in the Middle East, have once again thrust the Strait of Hormuz into the global spotlight, raising concerns that disruptions could have severe economic consequences worldwide.

What is the Strait of Hormuz?

Physically, the Strait of Hormuz is remarkably constrained. At its narrowest point, it spans just 21 miles (about 33 kilometers). However, the effective shipping lanes usable by large commercial vessels like supertankers are even narrower, consisting of two 2-mile (3-kilometer) wide channels for inbound and outbound traffic, separated by a buffer zone. These lanes are deep enough to accommodate the world’s largest crude oil carriers (VLCCs), making it the only viable sea route for much of the Gulf’s energy exports. Iran controls the northern coastline bordering the Strait.

The World’s Most Important Oil Chokepoint

The primary reason for the Strait’s critical importance is the sheer volume of energy commodities that pass through it. Approximately one-fifth of total global oil consumption flows through the Strait of Hormuz every day. According to various estimates, this volume typically ranges between 17.8 million and 20 million barrels of crude oil, condensate, and fuels daily, representing hundreds of billions of dollars in energy trade annually. Beyond oil, a significant portion of the world’s liquefied natural gas (LNG), particularly from major exporter Qatar, also transits this waterway.

This makes the Strait the world’s most vital oil transit choke point, a term used to describe narrow channels along widely used global shipping routes that are critical for energy transportation.

Who Relies on the Strait?

Most of the major oil-exporting nations bordering the Persian Gulf—including Saudi Arabia, Iran, the United Arab Emirates (UAE), Kuwait, and Iraq—rely on the Strait of Hormuz to ship the vast majority of their crude oil to international markets.

The reliance is particularly acute for Asian economies. Around 80-85% of the crude oil and LNG passing through the Strait is bound for destinations in Asia. China, the world’s largest energy consumer and a major buyer of Iranian oil, is heavily dependent on this route. India, South Korea, and Japan also import significant volumes of crude oil and natural gas via the Strait. In contrast, the US and Europe import much smaller quantities through this chokepoint compared to Asian nations. A disruption would therefore disproportionately impact Asian energy security and economies.

Geopolitical Tensions and Iran’s Position

Given its strategic location and the volume of trade, the Strait of Hormuz is inherently linked to regional geopolitics. Iran, situated along the northern shore, holds significant geographic leverage over the waterway. In times of heightened tension, particularly following external military actions or sanctions, Iranian officials have repeatedly issued threats, or debated proposals, to disrupt or close the Strait.

While Iran’s parliament has reportedly voted on measures to close the Strait, the final decision rests with the country’s top security council and the Supreme Leader. This capability gives Iran potential leverage to cause significant global economic shockwaves.

The Threat of Closure: How Could It Happen?

Experts believe Iran could employ various methods to attempt a disruption or closure, although none would guarantee a sustained blockade against international intervention. Potential tactics include:

Mine Laying: Deploying sea mines in the narrow shipping lanes using submarines or surface vessels. Iran is thought to possess a substantial arsenal of mines.
Attacks on Shipping: Using fast attack boats, anti-ship missiles from shore batteries or naval vessels, and potentially drones against commercial tankers and military vessels.
Submarine Operations: Utilizing submarines to harass or attack shipping or aid in mine deployment.

Any such attempt would be fraught with risk for Iran and challenging to execute effectively for a prolonged period. Shore-based assets would be vulnerable to counter-attack, and clearing mines in a contested environment is complex but feasible for capable naval forces.

What Happens if the Strait is Closed?

A sustained closure of the Strait of Hormuz would have immediate and severe global economic repercussions:

Oil Price Surge: With a fifth of global supply potentially halted, oil prices would likely surge dramatically, potentially reaching $100 per barrel or higher very quickly.
Inflation: Higher energy costs would fuel inflation worldwide, impacting transportation, manufacturing, and consumer prices.
Stock Market Volatility: Nervous investors would react negatively, causing significant instability in global financial markets.
Supply Chain Disruptions: Delays and increased shipping costs would ripple through global supply chains.
Economic Harm: Economies heavily reliant on energy imports through the Strait, particularly in Asia, would face significant challenges.

Why Full Closure is Unlikely

Despite the threats and potential for disruption, a complete and prolonged closure of the Strait of Hormuz is widely considered a “remote tail risk” by energy analysts and security experts, and it has never occurred in its history. There are several compelling reasons why:

Economic Self-Harm: Closing the Strait would be “economic suicide” for Iran itself, as its own vital oil exports and essential imports rely on the same waterway. Iran needs this route for its revenue and provisions.
International Response: The US and its allies, particularly through the presence of the US Fifth Fleet based in Bahrain, are committed to ensuring freedom of navigation. Any attempt at closure would likely trigger a swift, comprehensive, and overwhelming military response aimed at reopening the shipping lanes, as demonstrated during the “Tanker War” in the 1980s.
Alienating Allies/Customers: A closure would severely disrupt the economies of Iran’s few remaining significant energy customers, like China, and alienate neutral or sympathetic Gulf neighbors who also rely on the Strait for their exports. Losing China, which reportedly buys around 90% of Iran’s sanctioned oil exports, would be particularly damaging.

Alternative Routes

Recognizing the vulnerability of the Strait of Hormuz, some Gulf countries have developed alternative pipeline routes to bypass it. Saudi Arabia has its East-West pipeline, and the UAE has a pipeline to the port of Fujairah on the Gulf of Oman. Iran also has a newer pipeline to Jask port on the Gulf of Oman. However, the collective capacity of these alternative routes is estimated to be around 3.5 million barrels per day, only about 15% of the volume currently transiting the Strait. They cannot fully compensate for a major disruption.

A History of Tension

The Strait of Hormuz has a history marked by incidents and periods of tension, serving as a barometer for regional stability. This includes:

Targeting of shipping during the 1980-1988 Iran-Iraq War (“Tanker War”).
The tragic shootdown of an Iranian airliner by a US warship in 1988.
Iranian threats to close the Strait in response to sanctions, notably in 2012.

Attacks on vessels and seizures of tankers near the Strait in recent years (e.g., 2019 attacks, various seizures between 2023-2024).

While temporary disruptions, harassment, and seizures remain risks, a full, sustained closure is a drastic step with immense costs for all parties involved.

In conclusion, the Strait of Hormuz remains indispensable for global energy security and trade. While the potential for disruption is a constant concern tied to regional geopolitical volatility, the severe consequences for all involved, including Iran, and the likelihood of a forceful international response act as significant deterrents against a complete closure. Its status as a vital chokepoint ensures it will continue to be watched closely by policymakers and markets worldwide.