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Energy Markets · Geopolitics · Oil Prices · Strait Of Hormuz
Iran's parliament has reportedly voted to close the Strait of Hormuz in response to U.S. strikes on its nuclear facilities, raising concerns about global energy supply.
This 167-kilometer sea passage is a critical chokepoint, through which approximately 20 percent of the world's oil and gas demand flowed in 2024, according to the U.S. Energy Information Administration (EIA). While some oil flows (up to 30 percent) could be redirected via alternative pipelines in Saudi Arabia and the UAE, Capital Economics notes that Middle Eastern LNG exports, predominantly from Qatar, have no viable alternative routes.
Asia, particularly China, India, Japan, and South Korea, would be most affected, as 84 percent of crude oil and 83 percent of LNG passing through Hormuz in 2024 went to these markets. China, heavily reliant on Iran for nearly 50 percent of its crude imports, holds significant influence.
Experts, like Jackie Forrest of the ARC Energy Research Institute, consider a prolonged closure "fairly unlikely" due to the severe global economic repercussions and the vested interests of Gulf countries and the U.S. However, even temporary disruptions or alternative hostile actions, such as targeting tankers or infrastructure, could lead to substantial supply delays, increased shipping costs, and a potential doubling of oil and natural gas prices.
