Tensions between Iran and Israel have raised concerns that Iran might block the Strait of Hormuz , a narrow waterway between Iran and Oman that is vital for global oil and gas trade . Here’s what that could mean,:
What Is the Strait of Hormuz?
A 33 km-wide passage between Iran and Oman.
In 2024, it carried about 20 million barrels per day—roughly 20% of global oil and a quarter of all seaborne oil trade .
It also handled 20% of global liquefied natural gas (LNG) exports, mainly from Qatar and the UAE .
UAE & Middle East: Finding Alternate Routes
- The UAE sends around 75% of its oil to Asia through this strait.
- To prepare for a blockade, the UAE uses its Habshan–Fujairah pipeline , which bypasses the strait with a capacity of 1.8 million barrels per day .
- Saudi Arabia has a longer pipeline to the Red Sea capable of moving 5 million barrels per day .
- If the strait closes briefly, oil prices can jump, boosting UAE revenues. But long blockages would raise shipping costs and cause delays, especially for Asia-bound trade.
United States
- The U.S. gets less than 7% of its oil through the strait, so supply won’t be hit muc .
- But with crude prices over $100, U.S. petrol costs could rise past $4 per gallon, increasing inflation.
Europe
- Europe depends on Middle East oil and LNG, especially from Qatar — about 15% of its gas comes from this route .
- Disruption would deepen its ongoing energy shortages, raise prices further, and slow economic recovery.
Asia
- Asia is most exposed: about 75% of oil through the strait goes to Asia .
- China receives nearly half its oil from the Gulf and would rely on reserves or alternate supplies .
- India, Japan, and South Korea would face shortages and higher costs. Rerouting ships around Africa would raise prices and delay deliveries.
Africa (East)
- Importers in East Africa (e.g., Kenya, Tanzania) would face sharp fuel price increases.
- Shipping costs have already jumped 25–35% amid Red Sea risks; a full Hormuz disruption would worsen that .
Could Iran Actually Close It?
- Iran has naval mines, anti-ship missiles, and GPS jammers—tools that could block or disrupt shipping .
- In 2024, Tehran's parliament voted to approve closure, but the decision lies with its top security council .
- Experts say Iran is unlikely to fully block the strait because it needs it too—it exports 2.5 million barrels/day, mostly to China .
- A closure would likely provoke a military response from the U.S. and others .
Global Market Risks
- Goldman Sachs warns oil could surge to $100–$120/barrel, or even $150 in extreme cases .
- Insurance and shipping costs have already risen sharply ― doubling since mid-June .
- A deeper crisis could mirror the 1973 oil embargo—leading to soaring inflation, stressed supply chains, and economic slowdown.
What the World Is Doing
- The U.S. has moved two aircraft carrier strike groups into the Arabian Sea to deter threats .
- Governments are building emergency petroleum reserves—hundreds of millions of barrels in the U.S., Europe, and Asia—to cushion short-term shocks .
The Bigger Picture
The Strait of Hormuz is vital to global energy. Its closure—even temporary—would send shockwaves through oil prices, trade costs, and economies worldwide—from oil-exporting UAE to consumers in Asia, Europe, and the U.S. While Iran has the means to disrupt it, a full blockade is unlikely due to its own losses. Still, this renewed tension highlights how vulnerable global trade remains when one narrow waterway is under threat.
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