Demonstrators wave flags in a protest against Israel in Iran.Photo credit: https://www.tradewindsnews.com/tankers/iran-threatens-to-close-strait-of-hormuz-as-shipping-risks-being-sucked-into-regional-war/2-1-1833044
Global Supply at Risk as Iran Considers Closure of Strait of Hormuz
Amid escalating tensions between Iran and Israel, Tehran is reportedly “seriously considering” the closure of the Strait of Hormuz, a strategic maritime chokepoint connecting the Persian Gulf to the Gulf of Oman. This narrow passage currently facilitates the transit of approximately 20 million barrels of oil per day—about 20–30% of the world’s seaborne oil—and around one-third of global liquefied natural gas shipments.
The backdrop for this warning is a swift military escalation: on June 13, Israeli forces conducted airstrikes targeting Iranian energy and gas processing facilities, including sections of the South Pars field and depots near Tehran. Iran retaliated with missile strikes, heightening fears of a broader conflict that could disrupt vital energy infrastructure. Analysts warn that any disruption in the Strait of Hormuz could precipitate a supply crisis and escalate oil prices to $100–$120 per barrel, potentially intensifying global inflation.
Already, commercial activity in the region is being affected. Frontline, a major oil tanker operator, has suspended new contracts for voyages through the Strait and is exiting existing vessels in escorted convoys. Maritime analytics firm Windward reports a threefold increase in vessels reducing speed while transiting the strait, indicating a heightened perception of risk among ships. Additionally, Greece and the UK have formally advised merchant shipping to avoid the Strait and nearby Red Sea routes as a precaution.
Faced with the potential closure of Hormuz, maritime and energy operators may rely on two primary alternatives: longer maritime detours or pipeline redirection. Sea routes around the Arabian Peninsula into the Red Sea and through the Suez Canal (or around the Cape of Good Hope) could add one to two weeks to transit times and increase fuel and insurance expenses significantly. Meanwhile, overland pipelines in Saudi Arabia and the UAE—including the East‑West Petroline and Habshan–Fujairah pipeline—have limited spare capacity (approximately 4–5 million barrels per day) compared to the up to 20 million barrels currently moved through Hormuz.
Such shifts could have cascading consequences: prolonged transit times, skyrocketing freight rates, inflated insurance premiums, and renewed stress on global energy markets. With some estimates warning that consumer price indices could reach 5% in the event of sustained supply disruption, the global economic impact could be profound.
For stakeholders in shipping, energy, and logistics, it is crucial to evaluate contingency strategies—rerouting plans, insurance coverage, and the use of naval escorts. The implications of a Hormuz shutdown underscore the vulnerability of global supply chains to geopolitical volatility.
