94Ha ViewpointWhat are the effects if the Strait is blocked?
Energy inflation, oil price surge. According to Reuters, Citibank analysts said on June 20 that if hostilities between Iran and Israel escalate and Iran’s 1.1 million barrels of oil exports are interrupted, Brent crude oil prices may be about 15% to 20% higher than pre-conflict levels. “This means that Brent crude oil prices should be between $75 and $78 per barrel,” Citibank said in a report. At the same time, in the most extreme case, oil prices are expected to soar to $120 to $130 per barrel. Deutsche Bank pointed out that a surge in oil prices above $120 would trigger “a slowdown in global economic growth, similar to what happened in 1973, 1990 or 2022.”
Rising global transportation costs. According to the Financial Times, data from Clarksons Research, a data analysis company, shows that the increasing risks in the region have caused the charter prices of large tankers passing through the Strait of Hormuz to more than double, and the sharp increase in costs far exceeds the 12% increase in the Baltic Crude Tanker Index (which tracks global crude oil tanker freight rates) during the same period. Once the Strait of Hormuz is blocked, oil tankers will have to switch to other alternative routes, and the extension of route and time costs, tight crude oil supply and nervous consumer market sentiment will further increase transportation costs.
Impact on Eurasian energy imports. According to the EIA, 84% of crude oil and condensate and 83% of liquefied natural gas through the Strait of Hormuz will flow to the Asian market in 2024. China, India, Japan and South Korea are the main destinations for crude oil shipped to Asia through the Strait of Hormuz, accounting for 69% of the total flow of crude oil and condensate in the Strait of Hormuz in 2024. These markets may be most affected by supply disruptions in the Strait of Hormuz. The conflict between Israel and Iran has pushed up global diesel prices. According to Reuters on the 19th, the increase in diesel prices exceeded the increase in crude oil, reflecting investors’ concerns that the closure of the Strait of Hormuz may lead to a disruption in the supply of oil from the Middle East. Europe’s daily diesel imports in 2024 will reach 1.2 million barrels, accounting for about 44% of its total consumption, which makes European consumers and companies extremely vulnerable to global diesel transportation disruptions. The Middle East is the main diesel export region, accounting for about 17% of global marine diesel imports, most of which come from Gulf countries such as Kuwait, the United Arab Emirates and Saudi Arabia.
Due to increased domestic production and imports from Canada, the United States’ crude oil imports from the Persian Gulf countries are currently at their lowest level in nearly 40 years. Despite this, oil price fluctuations will still affect ordinary Americans through the crude oil market.
Triggering a geopolitical crisis. In addition to the economy and energy, the blockade of the Strait of Hormuz may also cause serious geopolitical shocks. The Associated Press reported that US President Trump recently said that if the confrontation between Iran and Israel continues to escalate, the United States does not rule out military intervention. Iran’s Deputy Foreign Minister responded that once the US military is involved, the region will fall into “hell.” Countries and organizations such as the European Union, NATO, India, and Japan may also be forced to intervene for the sake of shipping safety. Once energy security and military interests overlap, the situation can easily get out of control and evolve into a regional or even global conflict.
After the United States launched an airstrike on three Iranian nuclear facilities on the 22nd, the Iranian parliament quickly passed a proposal to “close the Strait of Hormuz” in a strong response. The parliament said that this proposal demonstrated the will of the state, but the final decision still needs to be made by the Supreme National Security Council. At the same time, Iran vowed to retaliate against the actions of the United States and Israel.
According to Iran’s state television on the 22nd, the Iranian parliament reviewed and passed a motion that day to support “closing the Strait of Hormuz” in response to the US-Israel attack. The parliament said that this proposal demonstrated the will of the state, but the final decision still needs to be made by the Supreme National Security Council. The Atomic Energy Organization of Iran confirmed that the Fordow nuclear facility suffered certain losses in the airstrike, but Iran’s nuclear program will not be interrupted. An Iranian government spokesman said that residents near Fordow, Natanz and Isfahan were not directly threatened, and no nuclear radiation was found, so they can live as usual.
Kamalvandi, spokesman for the Atomic Energy Organization of Iran:
Of course, they have caused us damage. This is not the first time that (the nuclear industry) has suffered damage. Some have happened in the past, but we immediately made up for it. Given the strength and capabilities we have, this (nuclear) industry must continue to develop and will not stop.
Revolutionary Guard Commander Pakpour said that the Revolutionary Guard’s retaliation against Israel “will not stop”. Iran is at a critical moment, and the unity of the people across the country is an important force to resist aggression.
Iranian Revolutionary Guard Commander Pakpour:
We are going through a critical moment. You have witnessed with your own eyes that the Iranian Air Force has never stopped its operations and has gained comfort from fighting Zionists. As the enemy continues to bomb us, our people are more united.
On the afternoon of the 22nd, a large number of Tehran citizens took to the Revolution Square in the city center to protest the US attack on Iran’s nuclear facilities and Israel’s military provocations. They held up placards with the words “Nuclear energy is our right” and shouted slogans such as “Down with the United States” and “Down with Israel”. Many demonstrators held photos of Supreme Leader Khamenei and portraits of senior Revolutionary Guard commanders who died in recent attacks to express their condolences and anger. Iranian President Pezerhicyan also participated in the protest. Some protesters said that in the face of foreign aggression, the Iranian people will unite and firmly defend the sovereignty and dignity of the country.
At this time, Iran is caught in a dilemma. The US move is undoubtedly a humiliation for the Iranians and a heavy psychological blow. If they fight back, they may fall into a full-scale war, but if they don’t fight back, it will shake Iran’s public opinion. Where will Iran go at this time? The entire Middle East is holding its breath, and the Middle East is at the peak of the crisis at this time.
The Strait of Hormuz is the only sea route for the transportation of oil from the Gulf region to the world. It is located between Oman and Iran, connecting the Gulf of Oman in the east and the Persian Gulf in the west. It is one of the most important oil “choke points” in the world. According to data from the U.S. Energy Information Administration, from 2024 to the first quarter of 2025, about 20 million barrels of crude oil will be shipped through the Strait of Hormuz every day, accounting for about 20% of the world’s daily oil demand. In addition, one-fifth of the world’s liquefied natural gas trade also relies on the Strait of Hormuz.
The exit and entrance of the Strait of Hormuz are about 50 kilometers wide, and the narrowest point is only 38.9 kilometers. Iran’s anti-ship missiles and fast minelayers deployed on the north bank can easily control the waterway. If the Strait of Hormuz is blocked, it will lead to supply disruptions, soaring insurance costs, and increased shipping risks. According to market estimates, oil prices may quickly rise above $100 per barrel, further pushing up inflationary pressures and causing serious impacts on import-dependent economies such as Europe, Japan, and India.
Even if Middle Eastern countries disperse their export routes, the overall substitution volume is still far less than the 20 million barrels per day in the Strait of Hormuz. Saudi Arabia’s east-west route and the UAE’s Habshan-Fujairah bypass route together can reportedly provide about 2.6 million barrels per day of spare capacity, which is only about one-eighth of the normal throughput of the Strait of Hormuz.
