The US and Israeli attacks on Iran have triggered rapid retaliatory attacks by Tehran, targeting its assets in multiple Middle Eastern countries, including Israel, Qatar, the United Arab Emirates, Kuwait, Bahrain, Jordan, Saudi Arabia, Iraq and Oman.
Analysts are warning of a rise in global oil prices after Iranian officials hinted at closing the Strait of Hormuz, one of the world’s most important shipping routes.
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On Saturday, an EU official told Reuters news agency that ships passing through the strait have been receiving very high frequency (VHF) transmissions from Iran’s elite Islamic Revolutionary Guard Corps (IRGC), saying “no ship can pass the Strait of Hormuz.”
However, the EU official added, Iran has not officially closed the strait. Instead, several tanker owners have suspended oil and gas shipments through the strait amid the ongoing conflict in the region.
“Our ships will remain in place for several days,” a senior executive at a major trading desk told Reuters on condition of anonymity. Countries such as Greece have also advised their ships to avoid transiting the waterway.
Any instability in this important shipping route could affect economic stability around the world.
So what is the Strait of Hormuz and how will its closure affect oil prices?
Where is the Strait of Hormuz?
The Strait of Hormuz lies between Oman and the United Arab Emirates on one side and Iran on the other. It links the Arabian/Persian Gulf, or simply the Gulf, with the Gulf of Oman and the Arabian Sea beyond.
It is 33 kilometers (21 mi) wide at its narrowest point, and the sea route is only 3 kilometers (2 mi) wide in any direction, making it vulnerable to attack.
Despite its narrow width, the canal is home to the world’s largest crude oil shippers. The Middle East’s major oil and gas exporters depend on it to move supplies to international markets, while importing nations depend on its uninterrupted operation.
How much oil and gas pass through the strait?
According to the US Energy Information Administration (EIA), around 20 million barrels of oil, worth about $500 billion in annual global energy trade, transited the Strait of Hormuz each day in 2024.
Crude oil passing through the strait comes from Iran, Iraq, Kuwait, Qatar, Saudi Arabia and the United Arab Emirates.
The strait also plays a key role in the liquefied natural gas (LNG) trade. According to the EIA, in 2024, about a fifth of global LNG shipments passed through the corridor, with Qatar accounting for the vast majority of those volumes.
Where is everything going?
The strait handles both exports and imports of oil and gas.
Kuwait and the United Arab Emirates import supplies from outside the Gulf, including shipments from the United States and West Africa.
The EIA estimated that in 2024, 84 percent of crude oil and condensate shipments transiting the strait will be headed to Asian markets. A similar pattern appears in gas trade, with 83 percent of LNG volumes moving through the Strait of Hormuz bound for Asian destinations.
China, India, Japan and South Korea accounted for a combined consumption of 69 percent of all crude oil and condensate flows through the strait last year. Its factories, transportation networks and power grids depend on uninterrupted power from the Gulf.
An increase in oil prices will affect countries such as China, India and several Southeast Asian nations.
How would the closure of the Strait affect oil prices?
According to Iranian state media, the final decision to close the strait must be made by the country’s Supreme National Security Council, and must be ratified by the government.
But energy traders have been on high alert in recent weeks amid escalating tensions in the region, home to one of the world’s largest oil and gas reserves. Muyu Xu, senior crude oil analyst at Kpler, told Al Jazeera that since the war began on Saturday, there has been a sharp drop in vessel traffic through the strait.
“At the same time, the number of vessels idled on both sides – in the Gulf of Oman and in the Gulf – has increased, as shipowners become increasingly concerned about the risks to maritime security following Tehran’s warning of a possible closure of shipping,” he said.
“The Strait of Hormuz is critical to the global energy market, as approximately 30 percent of the world’s seaborne crude oil transits through this route. Additionally, nearly 20 percent of global jet fuel and about 16 percent of gasoline and naphtha flows also pass through the Strait,” Muyu said.
“On Sunday, an oil tanker was hit off the coast of Oman just a few hours ago, indicating a clear escalation of the conflict and a shift in targeting from purely military facilities to energy assets.”
Shipping data showed that at least 150 tankers, including crude oil and liquefied natural gas vessels, have dropped anchor in open Gulf waters beyond the Strait of Hormuz.
The tankers were clustered in open waters off the coasts of major Gulf oil producers, including Iraq and Saudi Arabia, as well as LNG giant Qatar, according to Reuters news agency estimates based on ship-tracking data from the MarineTraffic platform.
Additionally, on Sunday, the UK Maritime Trade Operations (UKMTO) said it was aware of “significant military activity” in the Strait and said it had received a report of an incident two nautical miles north of Oman’s Kumzar, located in the Strait of Hormuz.
Kpler’s Muyu said a wide range of energy infrastructure is now under threat. “This is expected to dramatically intensify the rally in oil prices and could keep prices elevated for a sustained period, potentially longer than during last June’s conflict.”
Ali Vaez, director of the International Crisis Group’s Iran project, told Al Jazeera: “Closing the Strait of Hormuz would disrupt about a fifth of the world’s traded oil overnight – and prices would not only skyrocket, but burst upwards just out of fear.”
“The impact would reverberate far beyond energy markets, tightening financial conditions, fueling inflation and pushing fragile economies closer to recession in a matter of weeks,” he added.
When the United States and Israel bombed Iran last June, there was no direct disruption to maritime activity in the region.
What does it mean for the global economy?
Any disruption to energy flows through Hormuz will also affect the global economy, raising fuel and factory costs.
Hamad Hussain, climate and commodities economist at UK-based Capital Economics, said that for the global economy, a sustained rise in oil prices would add upward pressure to inflation.
“If crude oil prices were to rise to $100 per barrel and stay at those levels for a while, that could add 0.6 to 0.7 percent to global inflation,” he said, noting that this would also lead to an increase in natural gas prices.
“This could slow the pace of monetary easing by major central banks, particularly in emerging markets, where authorities tend to be more sensitive to swings in commodity prices,” he added.
