The Strait of Hormuz, a narrow passage between Iran and Oman, is the world’s most crucial oil lifeline, carrying roughly 20% of global oil consumption and a third of seaborne oil trade.
Its strategic importance is immense: any disruption here—whether a blockade, military clash, or even a threat—sends shockwaves through energy markets, pushing up prices and unsettling economies.
With Iran now threatening to close the strait amid US and Israeli strikes, its vulnerability is back in the spotlight.
Why it matters to the world?
In 2024, the Strait of Hormuz handled 20.3 million barrels per day of crude oil, condensate, and refined products, along with 290 million cubic metres of liquefied natural gas (LNG), as per the US Energy Information Administration.
That’s over one-sixth of global oil production and 20% of LNG trade, mostly from Qatar. Unlike other chokepoints, Hormuz has no practical alternative route.
Saudi Arabia’s East-West Pipeline and the UAE’s Fujairah pipeline can divert only 2.6 million barrels daily combined—a mere fraction of the strait’s flow.
A closure would cut off supplies from OPEC giants like Saudi Arabia, Kuwait, Iraq, and the UAE, hitting Asia hardest. India, China, Japan, and South Korea accounted for 67% of Hormuz’s oil flows in 2022-2023, highlighting the region’s dependence.
Even the hint of trouble shakes markets.
On 13 June 2025, Brent crude surged from $69 to $74 per barrel—a 7% jump in a single day—after tensions between Israel and Iran escalated.
A prolonged blockade could be disastrous, with JP Morgan and Deutsche Bank forecasting Brent at $120-$150 per barrel, surpassing the 2008 peak of $147.50. Such a spike would echo the 1973 oil crisis, when prices tripled.
In other words, a months-long closure could remove 18-19 million barrels daily from global markets, dwarfing OPEC+’s 5.7 million barrels of spare capacity, mostly located in the Gulf and thus stuck. Rising shipping costs and insurance premiums would add to the woes, with daily chartering rates for very large crude carriers already doubling from $19,998 to $47,609 amid recent flare-ups.
The strait’s geography makes it a geopolitical hotspot.
At its narrowest, just 34 kilometres wide with three-kilometre shipping lanes, it straddles Iranian and Omani waters.
Iran’s Islamic Revolutionary Guard Corps has a history of flexing its muscles, seizing tankers as recently as May 2023. Naval mines, fast-attack boats, and midget submarines give Tehran the means to disrupt traffic, though a full closure would likely trigger a response from the US Fifth Fleet.
The 1980s Iran-Iraq “Tanker War” saw both sides attack shipping, causing temporary price spikes. Iran’s June 2025 threat to shut Hormuz, following US strikes on its nuclear sites, underlines its leverage, even if its own 3.3 million barrels of exports, mostly to China, would suffer.
A prolonged disruption would wreak havoc on economies.
In India, heavily reliant on 1.5 million-2 million barrels daily via Hormuz, soaring oil and LNG costs would fuel inflation and widen trade deficits.
Petrol prices in the US could rise to $3.50 per gallon, up from $3.21 in June 2025, per some estimates. Europe, dependent on Qatari LNG, would face gas market turmoil.
As a key trade route, Hormuz’s closure would also disrupt global supply chains. Even a short blockade could spark stagflation, curbing demand while driving up costs.
Yet, markets often downplay Hormuz risks. Brent eased slightly after Israel’s June 2025 strikes spared Iran’s oil facilities, reflecting confidence in spare capacity and US naval deterrence.
Global oil stockpiles, at 4.2 billion barrels per the International Energy Agency, offer a 90-day buffer for some countries. US shale production adds resilience.
Still, these cushions are limited, and markets underestimate Iran’s ability to sustain disruptions through unconventional tactics. Gulf pipelines help but don’t eliminate the strait’s centrality.
China, importing 47% of its crude from the Gulf, has a stake in stability but lacks the naval clout to challenge US dominance.
The Strait of Hormuz is more than a waterway—it’s a global economic pivot.
A closure, though unlikely to last due to US military presence and Iran’s own interests, could unleash chaos. Oil prices would skyrocket, inflation would surge, and growth would falter, with India and Asia bearing the worst brunt.
Markets may dismiss the risk, but history—from the 1973 embargo to the 1980s Tanker War—cautions against complacency. This means that unless global markets move towards energy diversification and stronger supply chains to reduce Hormuz’s grip, the 34-kilometre strait will hold global oil markets hostage.