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Irish Examiner
12 hours ago
- Business
- Irish Examiner
ieExplains: What is the Strait of Hormuz and why is it so important for oil?
Iran's top security body must make the final decision on whether to close the Strait of Hormuz, Iranian TV said on Sunday, after parliament reportedly backed the measure in response to US strikes on several of Tehran's nuclear sites. Iran has in the past threatened to close the strait but has never followed through on the move, which would restrict trade and impact global oil prices. What is the Strait of Hormuz? The strait lies between Oman and Iran and links the Gulf north of it with the Gulf of Oman to the south and the Arabian Sea beyond. It is 33km wide at its narrowest point, with the shipping lane just 3km wide in either direction. Why does it matter? About a fifth of the world's total oil consumption passes through the strait. Between the start of 2022 and last month, somewhere between 17.8m and 20.8m barrels of crude, condensate and fuels flowed through the strait daily, data from analytics firm Vortexa showed. OPEC members Saudi Arabia, Iran, the United Arab Emirates, Kuwait and Iraq export most of their crude via the strait, mainly to Asia. The UAE and Saudi Arabia have sought to find other routes to bypass the strait. About 2.6m barrels per day (bpd) of unused capacity from existing UAE and Saudi pipelines could be available to bypass Hormuz, the US Energy Information Administration said in June last year. Qatar, among the world's biggest liquefied natural gas exporters, sends almost all of its LNG through the strait. The US Fifth Fleet, based in Bahrain, is tasked with protecting commercial shipping in the area. History of tensions In 1973, Arab producers led by Saudi Arabia slapped an oil embargo on Western supporters of Israel in its war with Egypt. While Western countries were the main buyers of crude produced by the Arab countries at the time, nowadays Asia is the main buyer of OPEC's crude. The US more than doubled its oil liquids production in the last two decades and has turned from the world's biggest oil importer into one of the top exporters. During the 1980-1988 Iran-Iraq War, the two sides sought to disrupt each other's exports in what was called the Tanker War. In July 1988, a US warship shot down an Iranian airliner, killing all 290 aboard, in what Washington said was an accident and Tehran said was a deliberate attack. In January 2012, Iran threatened to block the strait in retaliation for US and European sanctions. In May 2019, four vessels — including two Saudi oil tankers — were attacked off the UAE coast, outside the Strait of Hormuz. Three vessels, two in 2023 and one in 2024, were seized by Iran near or in the Strait of Hormuz. Some of the seizures followed US seizures of tankers related to Iran.
Daily Record
14 hours ago
- Business
- Daily Record
What is the Strait of Hormuz and why does it matter to global trade?
The UK could be hit hard if Iran closes the Strait of Hormuz in response to American strikes on its nuclear sites Fears of a widening conflict in the Middle East have deepened in recent days after the US bombed Iran. President Donald Trump made the unprecedented decision to bomb three Iranian nuclear sites over the weekend. The UK was not involved in the air strikes but was informed beforehand. John Swinney has called for the conflict to end, while Keir Starmer said Iran's nuclear programme is a "grave threat" which US military action would "alleviate". The world is now bracing for Iran's response to the US joining Israel in the biggest western military action against the Islamic Republic since its 1979 revolution. One way Iran could hit back, according to analysts, is to close off the strait of Hormuz, a vital trade route, through which over a fifth of the world's oil supply, 20m barrels, and much of its liquified gas, passes each day. Iran's parliament approved a measure to close the strait. Iran has threatened to close the strait in the past, which would restrict trade and impact global oil prices, but has never followed through. This time may be different, though. What is the strait of Hormuz? The strait of Hormuz lies between Oman and Iran and links the Gulf to the north with the Gulf of Oman to the south and the Arabian Sea beyond. It is 33km wide at its narrowest point, with the shipping lane just 3km wide. The strait is one of the world's most important oil chokepoints and is crucial to the US and beyond, as the strength of the global economy is heavily dependent on the flow of oil. Why is it so important? About one-fifth of the world's total oil consumption passes through the strait. Between the start of 2022 and last month, approximately 17.8 million to 20.8m barrels of crude, condensate, and fuels flowed through the strait daily, according to data from analytics firm Vortexa. Members of the Organization of the Petroleum Exporting Countries (OPEC) – Saudi Arabia, Iran, the United Arab Emirates, Kuwait and Iraq – export most of their crude via the strait, mainly to Asia. The US Fifth Fleet, based in Bahrain, is tasked with protecting commercial shipping in the area. What happens if it closes? Closing the strait would trigger a global oil crisis, skyrocket inflation rates and potentially plunge the economy into a downturn. On Sunday, specialists cautioned that such a move to shut the strait might also elicit "a significant military response" from both the US and its allies. Ami Daniel, CEO of maritime data company Windward, noted that even the mere "perception" of an Iranian assault on shipping could reduce maritime traffic to a mere trickle. Countless drivers could be hit with soaring fuel costs at the filling stations. The UK, which relies on imports for roughly half its oil supply, stands to be particularly exposed. Iran has been warned that shutting down the strait would be tantamount to "economic suicide", as reported by The Telegraph. US Secretary of State Marco Rubio has called on Iran's allies, including China, to exert pressure on Tehran to keep the Strait of Hormuz open, stating that any closure would be a "terrible mistake". Iranian oil also uses the same gateway, and shutting Hormuz risks bringing Gulf Arab states, who have been highly critical of the Israeli attack, into the war to safeguard their own interests, according to The Guardian. China would be particularly affected. The world's second-largest economy buys almost 90 per cent of Iran's oil exports, which are subject to international sanctions. What is Iran saying about the strait? Iranian lawmakers have voted to obstruct vital shipping routes through this key waterway after Trump decided to engage in the conflict between Israel and Iran. Iran's Press TV reported at the weekend that the Iranian parliament approved a measure to close the strait of Hormuz However, the vote by the Iranian parliament is not definitive, and state television has emphasised that the ultimate decision lies with Iran's top security officials. On Sunday Iran's foreign minister, Seyed Abbas Araghchi, said that Trump's decision to bomb Iran " will have everlasting consequences". Israel has made a "grave mistake" and "must be punished." He did not, however, make any specific reference to the strait of Hormuz. Join the Daily Record WhatsApp community! Get the latest news sent straight to your messages by joining our WhatsApp community today. You'll receive daily updates on breaking news as well as the top headlines across Scotland. No one will be able to see who is signed up and no one can send messages except the Daily Record team. All you have to do is click here if you're on mobile, select 'Join Community' and you're in! 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Business Standard
14 hours ago
- Business
- Business Standard
US asks China to dissuade Iran from closing Strait of Hormuz oil route
US Secretary of State Marco Rubio has urged China to intervene and dissuade Iran from shutting down the Strait of Hormuz, one of the world's most critical oil shipping routes. His request followed Iranian state media reports that the country's parliament had approved a proposal to close the Strait, although the final decision rests with Iran's Supreme National Security Council. The move comes days after the United States struck three of Iran's nuclear facilities, escalating tensions in West Asia and raising fears of a broader regional conflict. Rubio: Strait closure would be 'economic suicide' for Iran Speaking to Fox News on Sunday, June 22, Rubio said he had encouraged China to speak directly with Iranian authorities, noting that Beijing's economic interests were deeply tied to uninterrupted shipping through the Strait. 'If Iran closes the Strait, it would be economic suicide for them,' Rubio said, adding that while the US has response options, other nations—particularly energy importers—would suffer more. China, the largest importer of Iranian oil, imported over 1.8 million barrels per day from Iran last month, according to data from ship-tracking firm Vortexa. Strait of Hormuz: Global oil lifeline Roughly 20 per cent of the world's oil supply transits through the Strait of Hormuz. It serves as the main conduit for energy exports from key producers from West Asia, including Saudi Arabia, the UAE, and Iraq. Any disruption could cause severe market volatility and spike global fuel prices. Besides China, several major Asian economies—such as India, Japan, and South Korea—are heavily dependent on oil shipped through this strategic waterway. Oil prices surge after US-Iran escalation Oil prices spiked in the wake of the US strike on Iran 's nuclear facilities. On Monday morning, Brent crude futures rose by $1.52, or 1.97 per cent, to $78.53 per barrel—the highest level in five months. Market watchers say tensions in the Strait could push prices higher still, especially if Iran carries through on its threat. Indian exporters brace for freight shock Exporters and logistics firms in India are preparing for renewed shipping disruptions through the Gulf. Dushyant Mulani, chairman of the Federation of Freight Forwarders' Associations in India, said that freight rates had begun to rise and the situation remained volatile. He noted that with the United States targeting key Iranian nuclear facilities, retaliation was anticipated and tensions were likely to remain elevated. According to him, this would impact oil prices and shipping costs, with war risk premiums already being applied to shipments.
India Today
15 hours ago
- General
- India Today
The Strait of Hormuz: What it is and why it matters to global trade
The Strait of Hormuz is one of the most important and strategic waterways in the world. It is a narrow passage of water located between the southern coast of Iran and the northern coast of Oman and the United Arab Emirates. This strait connects the Persian Gulf with the Gulf of Oman and the Arabian Sea, providing the only sea route for oil tankers and ships carrying natural gas from the oil-rich countries surrounding the Persian Gulf to the rest of the its strategic location and enormous volume of oil and gas that transits through it daily, the Strait of Hormuz affects global trade and energy security. Threats to block or close the strait can significantly restrict global oil supplies, raise energy prices, and hurt economies around the IS THE STRAIT OF HORMUZ?The Strait of Hormuz, situated geographically and strategically between Oman and Iran, connects the North Gulf with the Gulf of Oman and the Arabian Sea further south. The Strait, thanks to its geographical location, serves as the only sea passage from the Persian Gulf to the open ocean. It is for this reason that the Strait of Hormuz is considered to be one of the world's most strategically important "choke points". The Strait is the primary export route for Gulf producers, including Saudi Arabia, the United Arab Emirates, Iraq, as well as is 33 kilometres wide at the narrowest point, while the shipping lane is only 3 km OF THE NAMEThe link to the Persian Gulf was described as early as the first century, in the Peri-pus of the Erythraean Sea, but the description did not name the opening. During the 11th to 17th centuries AD, the eastern side of the Persian Gulf was occupied by the Kingdom of Ormus, and scholars think the strait may be based on the name of the kingdom."Ormus" is of Persian origin and derives from the word "Hur-mogh," which means "date palm." The Hurmoz and Minab tribes still call the strait "Hurmogh".WHY IS IT SO IMPORTANT?The Strait allows roughly 20 per cent of the world's daily oil consumption, which is around 20 million barrels, to pass through it. Between January 2022 and August 2023, about 17.8m to 20.8m barrels of crude, condensate and fuels were passing through the Strait each day, according to data from Vortexa, an analytics of the members of the Organisation of the Petroleum Exporting Countries (OPEC) - Saudi Arabia, Iran, the United Arab Emirates, Kuwait and Iraq - ship most of their crude through the strait, most commonly to it has also been at the heart of regional tensions for years now and the problem seems to have escalated after the United States strike on three key nuclear facilities in Iran on June 21, which has put the spotlight back on the Strait of Hormuz. Iran has long threatened to choke the Strait and may act upon it if matters come to OF DISRUPTIONThe closure of the Strait is likely to trigger an oil price spike that would have an almost immediate inflationary impact in the US and in many countries globally, including India. However, experts say this course of action by Iran would lead to dramatic economic self-harm. Iranian oil uses the same choke point, and closing Hormuz risks drawing GCC Arab allies into the war to defend their is also said that the closure of the Strait would impact China significantly. The second-largest economy in the world purchases nearly 90% of Iranian oil-export revenues, which are secluded because most other countries do not agree to abide by sanctions imposed by the Chinese Strait of Hormuz continues to be an important geopolitical and economic area, with implications for global oil markets. It will be critical over the coming years that international diplomacy continues for all stakeholders, as this will affect energy security and global economic those who have studied West Asia and its global ramifications, any disruption in the Strait of Hormuz could affect consumer fuel prices and global economic recovery. For that reason, it is vital that stakeholders closely monitor developments as the Strait of Hormuz plays a significant role in international InMust Watch
Business Times
17 hours ago
- Business
- Business Times
Asia's reliance on Middle Eastern oil laid bare by Iran attacks
[PARIS] Oil buyers and traders across Asia are watching the escalation of a conflict around Iran with bated breath, as the top importing region braces for the impact of any disruption of exports from the Persian Gulf. Asia buys more than four-fifths of all the crude produced in the Middle East, and 90 per cent of that goes through the Strait of Hormuz, according to data from Kpler. Here are three key concerns for the Asian market as the conflict expands: The Iran-China link China, the world's largest oil refiner, gets about 14 per cent of its crude from Iran, Kpler data show. Actual flows are likely higher, with some imports from the Islamic Republic masked as shipments from not just Malaysia, but also the United Arab Emirates and Oman, in order to circumvent US sanctions. While China's larger state-owned processors seek to avoid breaching the bans, the country does not as a whole recognize unilateral US sanctions. And these discounted flows are vital for a hard-pressed private refining sector. There's growing concern those shipments could be disrupted. That has boosted demand for crude that can load on the Indian Ocean side of the Strait, including Abu Dhabi's Murban and Omani crude. Other grades that may benefit from any threat to Iranian flows are Russian ESPO, which loads from the Far East port of Kozmino, as well as Angolan varieties. BT in your inbox Start and end each day with the latest news stories and analyses delivered straight to your inbox. Sign Up Sign Up Iran's fuel exports Iran does not just ship crude – it is also a sizable exporter of fuel oil, selling mostly high-sulfur varieties used for shipping or as refinery feedstocks. Much of that supply eventually finds its way into ship-refueling hubs including Fujairah in the UAE, Singapore and Malaysia. The so-called straight-run fuel oil that can replace crude is typically exported to the relatively simple, low-margin processors in China known as teapots. Iran also has a lot of natural gas – sharing one of the world's largest deposits with Qatar. While the Islamic Republic uses most of that domestically, it sells by-products including liquefied petroleum gas and condensates internationally. China's giant plastics sector relies on Iran for almost a quarter of its imports of LPG, which can be used for cooking and heating but also processed into petrochemicals used as plastic building blocks. That relationship has only intensified after flows from the US, traditionally China's largest supplier, collapsed because of trade conflicts earlier this year. 'If there is a complete stoppage of Iranian LPG material or even, say, a halving of the average intake to China, China has few alternatives of substance,' said Samantha Hartke, head of market analysis for the Americas at Vortexa. Iran's influence on key shipping routes The vast majority of Asia's imports come through the Strait of Hormuz, making this waterway a focus for oil merchants. While Iran may choose not to block the conduit, it's also able to threaten the safety of navigation through the Red Sea – the shortest route between Asia and Europe – using proxies such as Yemen's Houthis. About 9 per cent of global seaborne trade normally passes through the Bab el-Mandeb chokepoint, or more than US$2 trillion worth of goods a year. That may affect Asia's supply from Russia, which has turned to markets in the East after being increasingly shunned by the US and traditional buyers in Europe because of its invasion of Ukraine in 2022. Ships carrying those massive volumes – ranging from flagship Urals crude to naphtha – must decide whether they continue to risk the Red Sea route, or face weeks of delays by going around South Africa instead. BLOOMBERG
