What to know about the Strait of Hormuz, a critical route for global energy supplies

Dubai, United Arab Emirates — Oil prices jumped on Monday as the sprawling war in Iran disrupted tanker traffic through the Strait of Hormuz, underscoring how important the route is to the world’s oil supply.

The Strait of Hormuz is the narrow mouth of the Persian Gulf through which one-fifth of the world’s oil passes. Tankers traveling through the strait bordered by Iran in the north carry oil and gas from Saudi Arabia, Kuwait, Iraq, Qatar, Bahrain, UAE and Iran. Most of that oil goes to Asia.

Any disruption to traffic through the Strait of Hormuz would greatly disrupt oil trade.

Hakan Kaya, senior portfolio manager at investment management firm Neuberger Berman, said “the scale of being in society cannot be overstated.” A partial slowdown for a week or two could be absorbed by oil companies, he said. But a full or complete shutdown of a month or more would push crude oil prices, around $70 on Monday, “into triple digits” and European natural gas prices “towards or above crisis levels seen in 2022”.

Here’s what to know about the Straits and the escalating war with Iran.

The Strait of Hormuz is a curved waterway that is about 33 kilometers (21 miles) wide at its narrowest point. It connects the Persian Gulf to the Gulf of Oman. From there ships can travel to other parts of the world. Although Iran and Oman have their own territorial waters in the strait, it is viewed as an international waterway through which all ships can navigate. United Arab Emirates, home to the skyscraper-studded city of Dubai, is located near the waterway.

Throughout history the Strait of Hormuz has been important for trade, with porcelain, ivory, silk and textiles moving through the region from China. In the modern era, it is the route for supertankers carrying oil and gas from Saudi Arabia, Kuwait, Iraq, Qatar, Bahrain, UAE and Iran. Much of that goes to Asian markets, including China, Iran’s remaining oil consumer.

Although pipelines in Saudi Arabia and the UAE could bypass the route, the US Energy Information Administration says “there are no alternative routes for most of the volumes that carry the strait to exit the region.”

Threats to this route have driven up global energy prices in the past, including during the Israel-Iran war in June.

The strait has not been officially closed, but tanker traffic has fallen sharply as satellite navigation systems have been disrupted, data and analytics firm Kpler said on Sunday X. The UK Maritime Trade Operations Center reported a number of attacks on ships in the area on both sides of the strait and warned of electronic interference with systems that show the ships’ whereabouts.

A drone boat carrying a bomb rammed a Marshall Islands-flagged oil tanker in the Gulf of Oman, leading into the strait from the east, killing one sailor, Oman said.

Iran is believed to be threatening ships approaching the Strait of Hormuz and has launched multiple attacks.

Iran temporarily closed parts of the strait in mid-February for what it said was a military drill. Oil prices jumped nearly 6% in the days that followed.

The decision was a rare, perhaps unprecedented closure of the Straits.

During past tensions and conflicts, Iran sometimes harassed shipping, and during the 1980 Iran-Iraq war, both sides attacked tankers and other vessels, using naval mines to completely halt traffic. But Iran has not carried out repeated threats to completely close the waterway since the 1980s, even during last year’s 12-day war when Israel and the US bombed Iran’s key nuclear and military sites.

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Anderson reports from New York.