Hormuz in Crisis: Energy Flows, Military Risks, and Global Impacts

On June 22, Iran suffered severe strikes targeting key nuclear facilities in Fordow, Natanz, and Isfahan—marking one of the most significant escalations in the ongoing war. In response, factions within the so-called "Axis of Resistance" warned that any U.S. involvement would provoke retaliation against American interests across the region. As tensions rise, global attention has turned toward strategic chokepoints and U.S. military bases in the Middle East—chief among them, the Strait of Hormuz. This narrow passage holds immense strategic and economic importance for global energy markets, and its potential closure could unleash far-reaching consequences on a global scale.

Strategic Importance of the Strait of Hormuz:

• Global Energy Lifeline:
  • Approximately half of the global oil and gas reserves are located in or around the Arabian Gulf. [1]
  • Roughly 20% to 25% of total global oil consumption, translating to 20 million barrels per day (b/d), travels through this waterway. In 2023, an estimated 20.9 million b/d of petroleum liquids transited through the Strait, accounting for approximately 20% of global consumption and over a quarter of all seaborne oil exports. [2]
  • About a fifth of the world’s total petroleum liquids consumption passes through it.
  • It handles approximately 20% of global liquefied natural gas (LNG) flows. Qatar, the world's largest exporter of LNG, relies almost entirely on this waterway for nearly a quarter of global LNG consumption. [1]
• Physical Characteristics:
  • The Strait is approximately 20 nautical miles across at its narrowest point. [3]
  • Navigational channels are only about 2 miles wide in both directions. [4]
• Traffic Volume:
  • Some 3,000 ships use the Strait to get to and from the Persian Gulf each month. [3]
• Direction of Flow:
  • In 2024, 84% of crude and condensate oil, as well as 83% of LNG that traveled through the Strait of Hormuz, were primarily directed toward Asian countries, accounting for a combined 69% of all Hormuz crude oil and condensate flows. [5]
• Other Commodities: [6]
  • The Middle Eastern Gulf (MEG), which uses the Strait, supplies over a quarter (25.7%) of global Natural Gas Liquids (NGLs) to Asia.
  • The MEG is a major exporter of refined products, accounting for 13.6% of global seaborne Clean Petroleum Products (CPP) and 14.5% of global Dirty Petroleum Products (DPP) exports.
  • It is also a major exporter of fertilizers and their feedstocks (16.3% of the global seaborne total), and supplies 35% of the world's seaborne methanol.
  • The MEG relies heavily on agricultural imports (grains, oilseeds, sugar), with grains and oilseeds representing 4.2% of the global seaborne total.

Implications of Closing the Strait of Hormuz (by the numbers):

• Economic Implications:
  • Oil and Gas Prices: Disruptions would cause an enormous surge in energy prices. Brent crude prices could potentially exceed $100 per barrel, with some forecasts suggesting they could reach $120-$130 per barrel in an extreme scenario. [2] One analyst suggested oil prices would rise by 40-50% within hours of a blockade. [7] This increase would be similar to 2022, when Brent crude surpassed $120 per barrel due to fears of Russian oil shortages. [2]
  • Global Inflation: The surge in energy prices would indirectly impact inflation and prices worldwide. [1]
  • Shipping and Trade Costs: There would be significant increases in costs such as insurance and shipping, as rerouting around the Arabian Peninsula would add thousands of nautical miles, delaying goods for days or weeks, and skyrocketing freight rates. [1]
  • Global Markets: Global financial markets would experience intense volatility, investor panic, steep drops in stock prices, and a widespread rise in risk aversion, potentially leading to the total collapse of stock markets worldwide. [5]
  • Recession and Job Losses: Many economies are expected to suffer from a deep recession, impacting millions of jobs. [5]
  • Impact on Gulf States: Gulf countries, heavily reliant on oil and gas exports, would face an immediate and significant decline in their primary income sources, leading to severe budget deficits, currency devaluations, and widespread economic contraction. [5]
  • Impact on Iran's Economy: Paradoxically, closing the Strait would harm Iran's own economy, as it relies on the waterway for its oil exports, which account for approximately 85% of its government revenue. Iran also heavily depends on the Strait for critical gasoline imports due to insufficient domestic refining capacity. [5]
  • China's Vulnerability: Nearly 45% of China’s total oil imports pass through the Strait of Hormuz. China, the world's largest oil importer, produced 4.3 million barrels of crude oil per day but imported 11.1 million barrels in 2024. China accounts for 90% of Iran’s oil exports. [8]
  • Alternative Routes: While Saudi Arabia and the UAE have alternative pipelines, their combined capacity (Saudi Aramco's 7 million barrels a day pipeline to Yanbu, and UAE's 1.5 million barrels a day pipeline to Fujairah) falls short of the volume normally transiting the Strait. The UAE and Saudi pipelines have an estimated 2.6 million barrels per day of unused capacity as an alternative. [4]
  • Iranian Oil Pricing: Iranian oil is typically sold below market price due to sanctions; the discount sharply declined from $11 per barrel in 2023 to $4 in 2024, and only $2 so far in 2025. [8]
  • Port Delays: Increased operational uncertainty is evident with a rise in estimated waiting times at Iran's main oil export terminal, Kharg Island, from five days at the beginning of May to eleven days before the end of last week. [2]
• Geopolitical and Security Implications:
  • Military Response: Any attempt by Iran to close the Strait would almost certainly provoke a strong US military response. The US Fifth Fleet, based in Bahrain, has a clear mandate to ensure freedom of navigation. [7]
  • Iran's Military Capabilities: Iran's Islamic Revolutionary Guard Corps (IRGC) Navy has about 20,000 men trained to board ships, mine sea lanes, or fire sea-to-sea missiles. Iran could employ unmanned drones (like the Shahed series), naval vessels to physically obstruct passage, naval mines (which could be laid within hours), small boats to plant limpet mines, and anti-ship cruise and ballistic missiles. [3]
  • Escalation of Conflict: It would escalate the conflict, having potentially immediate ramifications for all oil- and gas-producing Gulf states and, in the longer term, for economies of the region and the entire world. [1]
  • Historical Context (Tanker War): During the Tanker War (1980-1988), over 450 ships from 15 countries were attacked, with 400 crew members killed. Despite this, the flow of oil out through the Strait of Hormuz was at no point seriously disrupted. The conflict caused a temporary 25% drop in commercial shipping, but even at its most intense, it failed to disrupt more than 2% of ships passing through the Gulf. [1]
  • Israeli Strikes on Iran (as of June 15, 2025): Israel's attacks had killed at least 224 people in Iran. Iran retaliated by launching more than 370 missiles and hundreds of drones at Israel, killing 24 people and injuring over 500. Israel claimed to have destroyed over 120 surface-to-surface missile launchers in central Iran (a third of Iran's total), two F-14 planes, and 10 Quds Force command centers. An Israeli strike on an oil refinery in Haifa killed three workers. [1]
  • Iran's Internal Situation: The conflict has led to 1,277 people wounded in Iran. Human Rights Activists documented over 400 people killed, including 197 civilians. Israel ordered 300,000 to 330,000 people in central Tehran to evacuate from a city of around 9.5 million people. [1]
  • International Law: Under the 1982 United Nations Convention on the Law of the Sea (UNCLOS), transit passage rights through international straits like Hormuz cannot be suspended, making any blockade an unlawful use of force that would likely invoke the right of self-defense by affected states. [5]

While a full and sustained closure of the Strait of Hormuz has historically been viewed as improbable and strategically self-destructive for Iran, the aftermath of the recent U.S. strike introduces new uncertainties. If the Axis of Resistance chooses to act on its threats, the prospect of at least a temporary disruption to the Strait cannot be ruled out. Nonetheless, the severe political and economic consequences of such a move render the situation highly fluid. The coming period could unfold along multiple trajectories: a retaliatory escalation leading to limited or symbolic closure of the Strait; a diplomatic breakthrough prompted by the shock of the U.S. strike; or a reversion to the previous pattern of controlled hostilities absent further American engagement. The next steps will hinge on the interplay between military posturing, political calculations, and international mediation efforts.