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Time Magazine
6 hours ago
- Business
- Time Magazine
What Is the Strait of Hormuz and Why Is It So Important?
Iran has threatened to close the Strait of Hormuz, in what would serve as another act of retaliation after the U.S. launched strikes on three key Iranian nuclear facilities over the weekend. Iran controls the Northern side of the Strait of Hormuz, a passage which sees significant global trade pass through daily. If it so wished, Iran could block vessels from journeying through, or disrupt trade by seizing and attacking shipping containers and oil or gas tankers in the area. With roughly 20 million barrels of oil passing through the Strait daily, making up about a fifth of global consumption, any interruption could be catastrophic. Here's what to know about the Strait of Hormuz, its grave importance, and what stands to happen if the passage is disrupted amid the ongoing Israel-Iran conflict, of which the U.S. is now an active participant. What is the Strait of Hormuz? The Strait is narrow, stretching roughly 31 miles at its widest point. Iran is on its north bank opposite Oman and the United Arab Emirates (UAE). Most oil exports from Kuwait, Iraq, Saudi Arabia, Qatar, and the UAE pass through, as well as Iran's own exports. Around 20% of global liquid natural gas exports also flow through the passage, mostly originating from Qatar. The passage has long been an area of tension and geopolitical significance. In 2019, two ships were struck, one flying a Marshall Islands flag and the other from Panama, whilst passing through. The U.S. blamed Iran for the attacks, which Tehran denied. A month prior, four other tankers—two from Saudi Arabia, the others from the UAE and Norway—were struck by suspected underwater mines, which the U.S. accused Iran of planting. Noam Raydan, a senior fellow at the Washington Institute and an expert on energy and maritime risks, says that some countries, such as Iraq, rely on the Strait for nearly all of its energy exports, whereas other exporters have fairly reliable alternatives to fall back on, should disruption occur. What has Iran said about closing the Strait of Hormuz? The Iranian Parliament on Sunday voted in favour of closing the Strait of Hormuz. The decision of whether to carry out that action now lies with Iran's Supreme National Security Council and the Supreme Leader Ayatollah Ali Khamenei. 'Just verbal threats from Iran are causing concerns in the global market. So imagine how the impact will be if they really acted on their threats,' says Raydan. However, the maritime expert believes that a complete closure of the passage is unlikely as it would cause just as much harm to Iran themselves. 'The Strait of Hormuz is very important to Iranian allies such as China, because most of Iran's oil goes to China. Closing the Strait would also turn relations between Iran and the GCC [Gulf Cooperation Council] countries sour,' Raydan says, adding that Iranian relations with GCC countries such as Saudi Arabia and the UAE are currently stable and also not worth risking. 'Iran can cause disruptions and keep the oil markets jittery by only carrying out individual maritime attacks,' Raydan argues, saying isolated assaults are far more likely than a closing of the entire passage. She warns, however, that should Iranian energy infrastructure be targeted in further attacks, the Iranian response could be more severe, but "for right now, we should [instead] consider the maritime arena… there's a track history of Iran using that to retaliate.' Iran took part in the so-called Tanker War during the 1980s amid active conflict with Iraq, which saw oil tankers targeted by the Iranian military. The U.S. became involved and protected the tankers, in particular those flying U.S. flags, which it is bound to protect under maritime law. Has Iran threatened to close the Strait of Hormuz before—and did it follow through on its threat? Iran previously threatened to block the strait in 2011, when Iran's then-Vice President Mohammad Reza Rahimi declared that oil would not pass through the waters if Western sanctions against Iran were widened. The sanctions were issued as a result of concerns over Iran's nuclear capabilities—the very topic at the forefront of the current conflict. In this instance, Iran did not follow through on its threat. As TIME noted in 2011: International maritime law guarantees unimpeded transit through straits, and any deliberate military disruption can be considered an act of war. What would be the impact on global trade if Iran closes the Strait of Hormuz? Oil exporters and importers would stand to be vastly impacted by a closure. And the economic ripple effect would surely be felt far and wide. According to Deutsche Bank, the cost of a barrel of oil could surge to around $120, should Iran block the passage or cause disruption to its shipping lanes. The cost of a barrel currently stands at around $75. John Konrad, author and founder of maritime news site gCaptain, says that barriers on new tanker constructions and any disruption to production chains could have a 'massive' economic and social impact. 'If you have a slowdown in natural gas, you could have a slowdown in fertilizer,' he says, adding that this could lead to 'food shortages and unrest' in a worst-case scenario. The 'ton mile cost' of shipping oil and natural gas will largely increase if Iran were to block trade through the Strait of Hormuz, Konrad argues, even if importers find alternative sources. 'The main thing about disruptions and shipping is the ton mile. How many miles does it take to move a ton of oil, and what is that cost?' Kondrad notes. 'The United States is a lot further away from Europe, and much further away from the massive energy consumption in China and Japan and Korea than the Middle East. So what makes the Middle East [so powerful] is not only the abundance of oil, but its central location between Europe and Asia.' European consumers would also feel the impact of any disruption in Hormuz, specifically North-West Europe, when it comes to the prices of gas, oil, and jet fuel. 'U.S. refineries might intervene and substitute any gap, but still, disruptions would be felt. Prices will be higher,' Raydan says, adding that there would also be logistical issues, similar to those felt when Houthi strikes disrupted trade in the Red Sea following the start of the Israel-Hamas war. How have lawmakers from the U.S., U.K., China, and beyond responded? U.S. Secretary of State Marco Rubio warned against action in the Strait of Hormuz from Iran in an interview with Fox News on Sunday. 'I would encourage the Chinese government in Beijing to call him [Khamenei] about that because they [China] heavily depend on the Strait of Hormuz for oil,' Rubio said when asked if he expected Iran to close the Strait and disrupt global oil supplies. Rubio emphasized the U.S. viewpoint that any measures taken to disrupt supply chains in the Persian Gulf would be 'another terrible mistake.' 'It's economic suicide it they do it and we retain options to deal with that. It would be a massive escalation that would merit a response,' he warned. China has also expressed deep concern over the escalating conflict, and the potential for disruption in trade. 'The Persian Gulf and nearby waters are [an] important route for international trade in goods and energy. Keeping the region safe and stable serves the common interests of the international community,' said Guo Jiakun, the spokesperson for China's Ministry of Foreign Affairs, during a press conference on Monday. "China calls on the international community to step up effort to promote de-escalation of the conflict, and prevent the regional turmoil from having a greater impact on global economic growth." Jiakun went on to emphasize that "China stands ready to step up communication with Iran and other relevant parties to continue playing a constructive role for a de-escalation." U.K Foreign Minister David Lammy also spoke out on Monday, expressing concerns over the news from the Iranian parliament. 'It would be a mistake to blockade the Strait of Hormuz, I think he [Khamenei] gets that and understands that,' a hopeful Lammy told the BBC. In agreement, Kaja Kallas, the European Union representative for foreign affairs and security policy, told reporters on Monday: 'The closing of the Strait of Hormuz is something that would be extremely dangerous and not good for anybody.'
Middle East Eye
8 hours ago
- Business
- Middle East Eye
Why closing the Strait of Hormuz would hurt Iran the most
In the wake of the United States bombing Iranian territory for the very first time, Tehran is considering its options. Iran is weighing up how to retaliate to Washington striking three of its nuclear sites at Fordow, Natanz and Isfahan over the weekend. Among the retaliatory actions is attacking US assets in the region, a move that Iran has begun doing after striking an American airbase in Qatar on Monday. It could also follow through on threats to withdraw from the Non-Proliferation Treaty, an international pact that promotes nuclear disarmament and the use of nuclear energy for peaceful means. Or - in a move similar to its Houthi allies in Yemen - it could damage global trade by disrupting the flow of maritime traffic through the Strait of Hormuz. The Houthis disrupted international trade in the Red Sea for over a year, firing missiles and drones at vessels, in an act of solidarity with Palestinians under Israeli bombardment. New MEE newsletter: Jerusalem Dispatch Sign up to get the latest insights and analysis on Israel-Palestine, alongside Turkey Unpacked and other MEE newsletters Over the weekend, Iran's parliament voted to take a similar approach in the Strait of Hormuz. Ultimately, the vote was non-binding, and the power for such a decision lies with Iranian security officials. But it's a threat that has been taken very seriously by the international community, with Washington, the European Union, the UK and other global players urging against it. While closing the highly strategic strait would give Tehran a powerful lever, analysts believe that it could be Iran itself that suffers the most from such a move. Total or partial disruption The Strait of Hormuz is a narrow maritime channel, around 33km at its narrowest point, between the Musandam peninsula in Oman and Iran. It connects the Persian Gulf to the Arabian Sea, via the Gulf of Oman. It is considered to be within the territorial waters of both Iran and Oman. The strait is described as the most significant oil chokepoint in the world, with around a fifth of global oil output passing through it, and a third of global liquified natural gas (LNG). Roughly 20 million barrels of oil pass through the strait every day, of which around 14 million barrels are crude oil and six million are petroleum products. In addition, more than 10 billion cubic feet of LNG pass through the strait, much of which comes from Qatar. There are a number of different scenarios for how Iran could take action in the Strait of Hormuz. One of them is Iran directly closing the strait, according to Noam Raydan, an expert on maritime risks in the Middle East. Closing it would likely involve mining the shipping lanes with explosive munitions that would explode if they detect passing traffic. Tehran is believed to own thousands of Chinese-made sea mines. A second option would be "carrying out individual maritime attacks", Raydan told Middle East Eye, "aimed at commercial vessels with direct or indirect links to the US, for instance". 'Improved relations with Gulf states would be jeopardised by any attempt to disrupt shipping in the Strait of Hormuz' - Kristian Coates Ulrichsen, analyst Umud Shokri, an energy strategist and visiting fellow at George Mason University, said that such limited or sporadic attacks, or "acts of harassment targeting oil infrastructure, commercial vessels or maritime navigation systems", were much more likely. "These actions would aim to raise pressure without fully closing the vital chokepoint," Shokri told MEE. "It would escalate regional tensions and drive up global energy prices, while avoiding the devastating blowback of a full-scale closure." A third option would be to continue issuing verbal threats, as Tehran is currently doing, without following through on them. "These appear to be sufficient to keep maritime risks high, increase freight rates and keep oil prices jittery," said Raydan. The strait has never been completely closed off, though it has faced disruptions in the past. During the Iran-Iraq war in the 1980s, Iraqi forces attacked Iranian oil tankers near the strait. While Iran threatened to close off Hormuz, it didn't follow through. The war initially led to a 25 percent drop in commercial shipping and a sharp oil price hike. More recently, Iran has seized some ships in both the Gulf as well as the Strait of Hormuz. In the Gulf, Raydan noted that Iran had attacked ships in response to oil disputes with the US, including the seizures of the Greek tankers Delta Poseidon and Prudent Warrior in May 2022. They also seized MSC Aries near the Strait of Hormuz in April 2024. "This ship is believed to have been targeted due to indirect links to Israel," Raydan added. Gulf, Iran and Asia most impacted Saudi Arabia, Iraq, the United Arab Emirates, Kuwait and Qatar are all reliant on the Strait of Hormuz for exporting hydrocarbons. "Closing the Strait of Hormuz would not benefit Iran or its allies, as well as its relations with Gulf Cooperation Council (GCC) countries which appear to be in a good standing so far," Raydan said. While Iran and Gulf countries have historically been major foes, they have sought to build bridges in recent years. That included restoring diplomatic relations with Saudi Arabia two years ago. "Iranian officials may also be mindful of the fact that their improved relations with Gulf states would be jeopardised by any attempt to disrupt shipping in the Strait of Hormuz," Kristian Coates Ulrichsen, an expert on energy in the Middle East and fellow at the Baker Institute, told MEE. Iraq would also be severely impacted. "I would keep my eye on Iraq - OPEC's second biggest oil producer that greatly relies on oil exports from Basra - via Hormuz - for revenues," said Raydan. "Iraq is also home to some Iran-aligned armed groups that could intervene in the current conflict." It's not just Arab neighbours who export oil through the Strait of Hormuz - Iran itself is reliant on the waterway. "Iran has not stopped exporting its own oil via Hormuz since the conflict began, and these are sources of revenues for Tehran," said Raydan. 'Iran has not stopped exporting its own oil via Hormuz since the conflict began' - Noam Raydan, maritime expert Ninety percent of Iran's oil exports are to China, which receives it through the strait. Beijing is one of Iran's key partners on the global stage, so such a move would be both economically and politically destructive. The oil importers most affected by tensions in the Strait of Hormuz are all in Asia. "Roughly 84 percent of the oil passing through the strait is destined for Asian markets," Shokri said. "India receives nearly 40 percent of its crude oil through the strait." As well as China and India, Japan and South Korea receive large amounts of oil via the strait. While Saudi Arabia and the UAE have operational pipelines that can circumvent the Strait of Hormuz, Iran does not. Saudi Aramco operates the East-West crude oil pipeline, while the UAE can connect its onshore oil fields to the Fujairah export terminal on the Gulf of Oman, bypassing Hormuz. While Iran has built the Goreh-Jask pipeline and the Jask export terminal on the Gulf of Oman, it has not been used since 2021 and does not have the capacity to bypass the strait. Raydan noted that in the event that Iran can no longer export oil - for example if its export infrastructure was damaged significantly in an attack - then the risk of more serious Iranian actions along the strait may increase. But most analysts agree that it's quite unlikely that we will see a full shutdown. Ulrichsen does not believe Iran "can or will" close the Strait of Hormuz completely. "This is a standard threat that has been made by officials at various points over the past 40 years," he stated. "While Tehran may continue to use threats or limited disruptions as strategic leverage, it is likely to avoid actions that could provoke harsh responses from powerful regional and global actors," Shokri said.
