What is the Strait of Hormuz? What will happen to oil prices if Iran shuts it down?
This is called the most critical oil suffocation point in the world – Iran has power.
Washington's strike against Iran has raised concerns that Iran may retaliate by closing waterways between Iran and Oman, which is the waterway between Iran and Oman, where about 20% of oil and gas consume global flows.
Iran's initial retaliation does not appear to involve oil prices after the Straits, but analysts warn that opening strategic maritime entrances to the Persian Gulf could damage oil flows and destroy flows of the global economy.
“It will be extremely dangerous,” Kaja Kallas, senior EU representative for Foreign and Security Policy, told reporters on Monday.
If Tehran decides to destroy or close the strait, it will be “dangerous”.
“[It] “It could trigger a global economic shock wave and go against Iran's own interests,” Ozcelik said in an online statement.
Iran seems far away when it comes to stopping Israeli air strikes, but it has another golden target. David Common of CBC breaks the way in which the damage to strategic waterways is used to destroy the world economy by destroying oil flows.
Where is the Hormuz Strait?
The Strait of Hormuz extends between Oman and Iran.
The Straits link the Persian Gulf to the Gulf of Oman and the Arabian Sea. Its narrowest point is only 33 kilometers, but deep enough and wide enough to handle the world's largest crude oil tanker.
The transport lane is only three kilometers wide in either direction.
How much oil passes through the strait?
According to the U.S. Energy Information Administration (EIA), about one-fifth of the world's oil consumption passes through the Straits. Most of the oil is used in Asia. EIA noted that in 2024, China, India, Japan and South Korea are the main destinations of crude oil that EIA crosses the straits.
“There is a large amount of oil flowing through the strait, and if the strait is closed, there are few alternatives to move the oil out of the strait,” the EIA noted in a last week's analysis.
Oil passing through the strait comes from Saudi Arabia, the United Arab Emirates, Iraq, Iran, Kuwait and Bahrain, while the main supply of LNG comes from Qatar.
According to the EIA, 20.2 million barrels of crude oil, condensate and fuel flowed through the straits each day.
Although most choke points can be circumvented by using other avenues, which greatly increases transit time, some pathways, such as the Hormuz Strait, have no practical options, the EIA said.
“Most transit strait volumes have no other means to exit the region,” the EIA wrote.
What could happen to oil prices?
As the EIA explains, oil cannot transition to a major choke point, and even temporarily, “can generate significant supply delays and increase transportation costs and possibly increase world energy prices.”
Colby Connelly, a senior researcher in Iran, said the market will be on the edge before Washington, DC think tank The Middle East Institute is in an online statement.
On Sunday, Goldman Sachs analysts predict Brent crude oil prices could hit $110 if the Strait of Hormuz is blocked. Other analysts say prices could be as high as $120-130 a barrel (at least temporarily).
“Given the importance of the Straits in global oil trade, the impact on oil will be huge,” Homayoun Falakshahi, senior oil analyst at global trade data firm Kpler, said in an online video statement. “We’re going to see triple digits, to be sure.”
However, Farak Shahi added that closing the strait would be Iran's last resort.
Will Iran really close it?
Iran News TV reported that the Iranian parliament approved a measure to close the straits on Sunday, but any such move would require approval from the Supreme National Security Council.
Iran had threatened to close the straits, but never did. Doing so will cut off its own oil exports and damage its relations with its trading partner China and its Arab neighbors that export oil.
Suzanne Maloney, vice president and director of foreign policy at the Brookings Institute, called the vote in the Iranian parliament “purely symbolic.”
“Such steps will further undermine your own economy and endanger its fragile but valuable reconciliation with Saudi Arabia and other Arab countries in the Persian Gulf,” Maloney said on the Brookings website.
U.S. Secretary of State Marco Rubio called on Sunday to encourage Iran not to close the Hormuz Strait, citing China's dependence on Iran's oil.
“If they do, it's economic suicide for them,” Rubio said.
What else can Iran do?
Iran has a fast-attack ship and thousands of naval mines and missiles it can use to make the straits impassable, at least for some time, the Associated Press reported.
Iran's main naval base in Bandar Abbas is located on the north coast of the strait. It can also launch missiles from the long Persian Gulf shore as its ally, the Houthi rebels of Yemen did in the Red Sea.
Earlier Monday, shipbuilding data showed several tankers far away from the straits, although some were back.
Connery, with The Middle East Institute noted that while the U.S. strikes have increased volatility in situations that already threaten oil and gas supplies, the Straits “represent only one potential barrier to major energy damage.”
“It is understandable that the Strait of Hormuz will be under a microscope,” Connery said.
“However, increasing volatility could lead to unexpected disruptions to critical export infrastructure in the region, whether these infrastructures were intentional or intentional.”
Richard Haas, a former U.S. State Department official, said President Donald Trump's change to the Iranian regime is of no help. Haas said it was not a viable strategy and could cause more revenge from the Middle East countries.
