Strait of Hormuz stands as one of the most important trade chokepoints in the world in general and the oil and energy industry in particular.
This narrow passage is found between Iran and Oman and it links the Persian Gulf and the Arabian sea and the Gulf of Oman. Although this Strait is estimated at approximately 21 miles wide in the narrowest stretch, an estimated 20 percent of the world oil supply and a sizeable percentage of world liquefied natural gas (LNG) deliveries are carried via this Strait.
Geographical and Strategic Importance
The Straits of Hormuz is found at the mouth of the Persian Gulf with Iran on the north side and the United Arab Emirates and Oman on the south. It also acts as the single sea route between the Persian Gulf and the open ocean and therefore a very important gateway in exporting energy in the Middle East.
Key oil-producing industries in Saudi Arabia, Iran, Iraq, Kuwait, and the UAE are dependent on the route to export crude oil. According to the U.S. Energy Information Administration (EIA) more than 17 million barrels of oil a day flowed through the Strait in 2023 and represented close to a fifth of world oil use.
Also, Qatar which is the second largest exporter of liquefied natural gas in the world has utilized this route to export liquefied natural gas to both Europe and Asia which further brings to the fore the role played by the Strait in the global energy supply chain.
Why the Strait Matters to Global Trade
The politics of the Strait of Hormuz do not end in the regional scale; it coincides with the security of the international energy markets. Industrial economies highly depend on oil which any disturbance in supply results into price volatility, inflation and energy insecurity.
In the case of China, India, Japan, South Korea, and most countries of the European continent that rely on oil importation, a very large percentage of the imported energy of these countries circumvents this narrow channel. Even the United States which does not consume as much Middle Eastern oil now that it has its own domestic shale production sources is worried about its effect on the global prices and its allies.
What Happens If the Strait Is Closed?
The idea of the Strait of Hormuz being blocked or closed has been a recurring geopolitical threat, particularly during recent Iran-U.S. tensions. Iran has often threatened to shut down the Strait in response to Western sanctions or military actions.
If such a closure were to occur, the consequences would be immediate and severe:
1. Surge in Global Oil Prices
Disruptions would result in an instant spike in oil prices—potentially skyrocketing to over $150 per barrel, as analysts predict. Even a partial or temporary disruption would send shockwaves through global markets.
2. Energy Shortages
Countries heavily reliant on Gulf oil—such as Japan, China, European Union, South Korea, and India—could face energy shortages, forcing them to dip into strategic reserves or seek alternative suppliers at higher costs.
3. Global Supply Chain Disruptions
Industries that depend on affordable energy—like transportation, manufacturing, and agriculture—would be severely affected. This could trigger inflationary pressures worldwide, impacting consumer prices and economic growth.
4. Military Escalation
Any attempt to close the Strait would likely invite military intervention from the United States and allied naval forces. The Strait is patrolled regularly by U.S. Navy fleets to ensure its openness, and any blockade could escalate into a regional or even global conflict.
5. Insurance and Shipping Costs
Even without a complete closure, rising tensions lead to higher insurance premiums for tankers, delays in shipping, and risk-averse rerouting, all of which contribute to increased costs for global trade.
Strait of Hormuz is not just a dark alley of water but is a tension point on the world map, and is the key to the stability of world energy. As the world today lives in a time when geopolitical pressures may rise within no time, the geostrategic importance of this crucial chokepoint is not less significant than ever before.
With the interruption of oil and gas supply through the Strait, the global economy will not be stable. Being able to access it further is not only a local problem, it is a subject of economic security on a global scale.
