The United States and Israel’s war against Iran has spread to the Strait of Hormuz, one of the world’s most critical energy bottlenecks, causing oil prices to rise.
Shipping through the strait, which carries a fifth of the oil consumed globally as well as large quantities of gas, has virtually stopped amid Iranian attacks on oil tankers in the region.
Recommended stories
list of 4 itemsend of list
A commander of Iran’s Revolutionary Guard Corps (IRGC) said on Monday that the strait was “closed” and that any ship attempting to pass through the waterway would be “set on fire.”
At least five tankers were damaged, two staff members were killed and around 150 ships were stranded around the strait, which separates Iran and Oman.
Oil prices rose above $79.40 a barrel on Monday, after hitting $73 a barrel on Friday amid rising tensions in the run-up to Saturday’s joint US-Israeli attacks on Iran.
“Traffic is down at least 80 percent,” Michelle Bockmann, senior maritime intelligence analyst at Windward, told Al Jazeera, adding that the shipping industry had already been dealing with a “huge increase” in freight costs for routes from the Middle East and the Gulf.
Cormack McGarry, director of maritime security and intelligence services at Control Risks, said sailors received a message from Iran over the international distress frequency on Saturday that the strait was closed.
“Every ship in the area would have heard that… and it was enough for most ships to stop.”
The Kpler ship tracking service showed on Sunday that limited traffic continues in the strait, mainly ships flying the flag of Iran and its main trading partner, China.
Bockmann said it was possible that some ships had passed through the strait after turning off their automatic identification system to avoid detection.
McGarry said a complete closure of the strait by Iran would mean it was “tightening the noose around its own neck.”
“If they attack shipping, they are encouraging the Gulf states to join the war, and it is a big step for Iran to get there,” McGarry said.
“The idea that they could affect a long-term sustained closure of the strait is completely unlikely,” he added. “I’m more concerned about regional supply chains.”
Still, according to Kpler, most commercial operators, major oil companies and insurers have effectively withdrawn from the corridor. Before the war, insurance premiums had already reached their highest level in six years.
“There has definitely been an escalation overnight, with pressure on energy infrastructure in the Gulf and Qatar preemptively halting LNG production,” Rachel Ziemba, a research associate at the Center for a New American Security, told Al Jazeera.
“The fact that tankers are unwilling to enter the Gulf sends a message of what is at stake.”
The United States is not immune
Iran had increased oil exports to multi-year highs in February in anticipation of attacks by the United States and Israel, Kpler said.
Gulf states have also been front-loading their oil supplies, helping to offset supply problems in the short term, Ziemba said.
Most of the crude oil shipped through the Strait of Hormuz goes to Asia, with China, India, Japan and South Korea accounting for nearly 70 percent of shipments, according to the U.S. Energy Information Administration.
In addition to oil, energy products facing supply pressures include jet fuel and liquefied natural gas.
About 30 percent of Europe’s jet fuel supply originates or transits through the strait, while a fifth of the world’s LNG supply passes through the canal.
Although the United States is no longer dependent on Middle East oil and it may take weeks for prices at the pump to be affected, it is not immune to disruptions.
“The situation is very fluid,” David Warrick, executive vice president at supply chain platform Overhaul, told Al Jazeera.
As companies reroute their ships, including around the Cape of Good Hope near southern Africa, they face longer delivery times and additional costs.
“With war risk insurance and additional emergency contingency insurance, we’re adding thousands of dollars,” Warrick said.
“This is the best time to stock up on raw materials and plan vacations… and any disruption right now is not really good for supply chains,” Warrick said.
There could also be winners from disruption.
As a net energy producer, higher prices will benefit U.S. oil producers, Ziemba said.
“The consumer sectors lose, but the producers benefit. The question is: how long will this last? It is difficult to remain at this intensity for long periods of time,” he said.
