How US-Israel attacks on Iran threaten the Strait of Hormuz, oil markets

The US-Israeli attacks on Iran have triggered swift retaliatory attacks from Tehran, targeting their assets in multiple Middle East countries, including Israel, Qatar, the United Arab Emirates, Kuwait, Bahrain, Jordan, Saudi Arabia, Iraq and Oman.

Analysts are warning of a spike in global oil prices after Iranian officials hinted at shutting down the Strait of Hormuz, one of the most important maritime routes in the world.
On Saturday, an official from the European Union told the Reuters news agency that vessels crossing the strait have been receiving very high frequency (VHF) transmissions from Iran’s elite Islamic Revolutionary Guard Corps (IRGC), saying “no ship is allowed to pass the Strait of Hormuz”.

However, the EU official added, Iran has not officially closed the strait. Instead, several tanker owners have suspended oil and gas shipments through the strait amid the ongoing conflict in the region.

“Our ships will stay put for several days,” a top executive at a major trading desk told Reuters on condition of anonymity. Countries like Greece have also advised their vessels to avoid transiting through the waterway.

Any instability in this important maritime route could rattle economic stability worldwide.

So what is the Strait of Hormuz, and how will its closure impact oil prices?

Where is the Strait of Hormuz?
The Strait of Hormuz is located between Oman and the UAE on one side and Iran on the other. It links the Arabian/Persian Gulf, or just the Gulf, with the Gulf of Oman and the Arabian Sea beyond.
It is 33km (21 miles) wide at its narrowest point, with the shipping lane just 3km (2 miles) wide in either direction, making it vulnerable to attack.

Despite its narrow width, the channel accommodates the world’s largest crude carriers. Major oil and gas exporters in the Middle East rely on it to move supplies to international markets, while importing nations depend on its uninterrupted operation.

How much oil and gas pass through the strait?
According to the US Energy Information Administration (EIA), about 20 million barrels of oil, worth about $500bn in annual global energy trade, transited through the Strait of Hormuz each day in 2024.

The crude oil passing through the strait originates from Iran, Iraq, Kuwait, Qatar, Saudi Arabia and the UAE.

The strait also plays a critical role in the liquefied natural gas (LNG) trade. According to the EIA, in 2024, roughly a fifth of global LNG shipments moved through the corridor, with Qatar accounting for the vast majority of those volumes.

Where does it all go?
The strait handles both oil and gas exports and imports.

Kuwait and the UAE import supplies sourced outside the Gulf, including shipments from the United States and West Africa.

The EIA estimated that in 2024, 84 percent of crude oil and condensate shipments transiting the strait headed to Asian markets. A similar pattern appears in the gas trade, with 83 percent of LNG volumes moving through the Strait of Hormuz destined for Asian destinations.

China, India, Japan and South Korea accounted for a combined 69 percent intake of all crude oil and condensate flows through the strait last year. Their factories, transport networks and power grids depend on uninterrupted Gulf energy.

A spike in oil prices will impact countries such as China, India and several Southeast Asian nations.

How would the Strait’s closure impact oil prices?
According to Iranian state media, the country’s Supreme National Security Council must make the final decision to close the strait, and it has to be ratified by the government.

But energy traders have been on high alert in recent weeks amid escalating tensions in the region – home to one of the largest reserves of oil and gas in the world. Muyu Xu, senior crude oil analyst at Kpler, told Al Jazeera that since the war began on Saturday, there has been a sharp drop in vessel traffic through the strait.

“At the same time, the number of vessels idling on either side – in the Gulf of Oman and the Gulf – has surged, as shipowners grow increasingly concerned about maritime security risks following Tehran’s warning of a potential navigation closure,” she said.