OPED By: Rear Admiral Sanjay Roye AVSM VSM (Retd.), Indian Navy
The Strait of Hormuz, nestled between Iran and the Arabian Peninsula, is the world’s most critical energy chokepoint.
Just 21 miles wide at its narrowest, this narrow maritime passage connects the Persian Gulf with the Arabian Sea and facilitates the daily transit of approximately 20.5 million barrels of oil and petroleum liquids—around 21% of global petroleum consumption, according to the U.S. Energy Information Administration (EIA).
Beyond crude, the strait is equally vital for LNG exports, with nearly a third of the world’s liquefied natural gas—primarily from Qatar—passing through.
Its geographical and economic significance make it a potential flashpoint, where any disruption can cause global tremors.
What Is Transported Through the Strait?
This waterway carries around 20 million barrels per day of crude oil and petroleum liquids from Gulf producers—Saudi Arabia (~6.5 m bpd), Iraq (~3.3 m bpd), UAE (~2.8 m bpd), Kuwait (~2.1 m bpd), and Iran (~1.3 m bpd)—plus vast volumes of LNG, refined products, petrochemicals, containerized cargo, and dry bulk.
In total, it serves as a lifeline for both raw and processed energy commodities. Qatar alone exports approximately 77 million tonnes of LNG per year, of which nearly 70% goes through this strait.
Despite the rise in diversified trade and energy sources globally, the sheer volume of goods passing through Hormuz ensures its continued strategic relevance.
What If Iran Disrupts Or Closes the Strait?
Iran has long used the threat of closing the Strait of Hormuz as strategic leverage against sanctions or foreign pressure.
While a full-scale blockade would inflict significant harm on Iran’s own economy—given its dependence on oil revenues—limited disruption through tactics like naval mines or harassment of tankers (through deployment of fast attack boats or firing missiles from the Iranian coastline) remains a plausible scenario.
The possibility of other players joining in support of Iran cannot be ruled out. Even a temporary closure could unsettle oil markets and spike global shipping costs.
Due to the ongoing Israeli attacks, these threats resurfaced amid renewed regional tensions, prompting strong responses from the United States.
The US Secretary of State declared that any move by Iran to shut the strait would amount to “economic suicide” and would devastate Tehran’s own economy.
The U.S. also publicly urged China—a major importer of Gulf oil and an Iranian trade partner—to leverage its influence to de-escalate the situation.
These high-level statements reflect the urgency and seriousness with which major powers view the possibility of a blockade, recognizing that even the threat of closure can destabilize global energy markets.
Iranian senior leadership is already on record that the closure is ‘under consideration’.
Immediate Economic Impact
A significant disruption in Hormuz could instantly shock oil markets. Analysts estimate that Brent crude could spike to $150–200 per barrel, up from the 2025 average of $85.
This would not only burden consumers with high fuel costs but also trigger a surge in global inflation. The IMF opines that for every 1% rise in oil prices, global inflation increases by about 0.3 to 0.4 percentage points.
Financial markets would react sharply—equity indices would fall, particularly in oil-importing countries (the Indian markets already reacted this morning), while currencies of such nations could depreciate as trade deficits widen.
Central banks may respond with hawkish monetary policy, potentially dampening growth prospects amid rising inflationary pressures.
Who Gets Affected The Most?
The most vulnerable economies would be large-scale oil importers, particularly in Asia.
China receives over 40% of its crude oil via Hormuz, India relies on the strait for around 35% of its oil imports, while Japan and South Korea rely almost entirely on Gulf crude.
European nations, such as Italy and Greece, would also face supply disruptions. The ripple effects would extend to developing countries in Africa and Latin America, which import refined products from the Middle East.
Ironically, Persian Gulf oil exporters would suffer too—Saudi Arabia, Kuwait, and the UAE could see massive revenue drops if tankers are grounded, even if they themselves are not the source of conflict.
How Does It Impact The US?
A closure of the Strait of Hormuz would have significant implications for the United States, both strategically and economically.
The United States maintains a dense network of military bases across the Gulf, including those in Bahrain, Qatar, and the United Arab Emirates, primarily to secure energy flows and deter regional aggression.
A closure would challenge US naval freedom of navigation and potentially entangle it in a larger regional conflict. Security concerns for its bases will spiral, and the likelihood of damage to their military establishments, including warships, cannot be ruled out.
Economically, while the US has become less dependent on Gulf oil due to increased domestic production, global oil price spikes would still impact its inflation, financial markets, and broader economic stability.
Alternatives & Mitigating Factors
Efforts to reduce dependence on Hormuz have led to the development of pipeline alternatives. Saudi Arabia’s East-West Petroline, with a capacity of 5 million bpd, routes oil to the Red Sea port of Yanbu, bypassing the strait.
The UAE’s Habshan–Fujairah pipeline can carry 1.5 million bpd directly to the Gulf of Oman. Together, these pipelines can reroute just over 6.5 million bpd, covering only a third of the daily oil traffic through Hormuz.
On the resilience front, OECD countries maintain strategic petroleum reserves (SPR). The USA SPR alone can release approximately 4.4 million barrels per day for 90 days. However, these measures serve as short-term buffers, not sustainable solutions.
Crucially, no alternate sea route exists for Persian Gulf oil exports, underscoring Hormuz’s irreplaceable role.
Long-Term Economic and Strategic Ramifications
Beyond immediate price spikes, a disruption in Hormuz would accelerate structural shifts in the energy sector. Countries would hasten efforts to diversify oil sources and invest in renewable energy and domestic production.
Energy security would rise to the top of national agendas. Shipping and insurance costs in the region would also increase sharply, with war risk premiums on tankers already known to increase tenfold during periods of high tension, such as in 2019.
There would be an upsurge in military spending, regional defence cooperation, and naval modernization. The instability would also weaken regional economies reliant on oil revenue and could stir internal unrest, especially in nations with fragile political systems or economic imbalances.
Historical Precedents
The 1980s Iran-Iraq “Tanker War” offers a stark precedent. Both nations attacked oil tankers in the Gulf, leading to temporary but significant disruptions. Insurance costs soared, and global shipping was disrupted even though Hormuz remained open.
More recently, in 2019, tensions spiked again after Iran was accused of attacking commercial tankers and downing a U.S. drone.
Though the Strait wasn’t closed, oil prices jumped by 4–6%, highlighting market sensitivity to perceived threats. These incidents underscore that even without a full closure, geopolitical frictions around Hormuz can destabilize markets and raise costs for all stakeholders.
Concluding Opinion
The Strait of Hormuz represents both an economic artery and a geopolitical pressure point. Any significant disruption—temporary or protracted—would unleash widespread economic turmoil, energy insecurity, and political fallout.
With around a fifth of the world’s oil and a third of its LNG flowing through this narrow corridor, the stakes are enormous.
While mitigation strategies exist, the reality is that there is no true substitute for Hormuz in the short term.
The recent US warnings and calls for Chinese intervention underscore the gravity of the current situation.
Energy security, economic resilience, and diplomatic foresight are now more intertwined than ever. Recent developments have played out the scenarios in their physical form.
As time passes, the gravity of those decisions seems to be seen in a more grim perspective. While the world watches with disbelief, overtures to keep the Strait open would be visible with greater frequency.
- Rear Admiral Sanjay Roye AVSM VSM (Retd.), Indian Navy, is a former Captain of the Akula-class SSN INS Chakra and Flag Officer Commanding Gujarat Naval Area. He is a keen follower of strategic and maritime events.)
- He may be contacted at sanjayroye (AT) gmail.com
- THIS IS AN OPINION ARTICLE. VIEWS PERSONAL OF THE AUTHOR
