BAKU, Azerbaijan, June 22. Iran's parliament has voted to close the Strait of Hormuz, though the final decision lies with the country’s Supreme National Security Council. The announcement came shortly after the United States carried out airstrikes on three nuclear facilities in Iran, reportedly destroying infrastructure at the targeted sites.
As tensions between Iran and Israel continue to escalate — including strikes on critical energy infrastructure — the threat of closing the Strait of Hormuz has shifted from a hypothetical scenario to a very real geopolitical risk. Global energy markets and financial institutions are watching closely, aware that even a brief closure of the strait could trigger a worldwide energy shock.
The Strait of Hormuz: a critical artery of global energy flows
The Strait of Hormuz is a 33-kilometer-wide waterway between Oman and Iran, through which around one-fifth of the world’s oil supply is transported. Deep and wide enough for the world’s largest oil tankers, it is considered one of the most vital chokepoints for global energy transit. If shut down, few viable alternatives exist.
According to the U.S. Energy Information Administration (EIA), an average of 20 million barrels of oil per day passed through the strait in 2024—about 20% of global oil liquids consumption. That level has remained steady through the first quarter of 2025.
Between 2022 and 2024, crude oil and condensate shipments via Hormuz declined by 1.6 million barrels per day, a drop only partially offset by a 0.5 million barrel increase in refined products. The decrease was largely due to OPEC+ production cuts (beginning November 2022) and disruptions at the Bab el-Mandeb Strait, prompting Saudi Arabia to divert flows through its East-West pipeline to the Red Sea.
In 2024 and early 2025, more than a quarter of global seaborne oil trade and about 20% of oil liquids consumption moved through the strait. Roughly 20% of global LNG trade—mostly from Qatar—also transits Hormuz.
Volume of Oil and Gas Transported Through the Strait of Hormuz, 2020–Q1 2025
(in million barrels/day unless noted otherwise)
| Metric | 2020 | 2021 | 2022 | 2023 | 2024 | Q1 2025 |
|---|---|---|---|---|---|---|
| Total oil shipments through Hormuz | 19.1 | 19.4 | 21.4 | 21.4 | 20.3 | 20.1 |
| └ Crude oil & condensate | 14.3 | 14.4 | 16.0 | 15.5 | 14.3 | 14.2 |
| └ Refined products | 4.8 | 5.0 | 5.5 | 5.8 | 5.9 | 5.9 |
| Global seaborne oil trade | 71.4 | 72.6 | 74.3 | 76.0 | 75.5 | 75.7 |
| Global oil & liquid hydrocarbon use | 91.0 | 96.6 | 99.5 | 101.8 | 102.7 | 102.1 |
| LNG flows through Hormuz (bcf/day) | 10.7 | 10.7 | 11.0 | 10.5 | 10.3 | 11.5 |
In 2024, 84% of the oil and 83% of LNG passing through Hormuz went to Asia. China, India, Japan, and South Korea alone accounted for 69% of all crude and condensate volumes.
Are there alternative routes?
Saudi Arabia and the UAE operate pipelines that can partially bypass the Strait of Hormuz, with a combined capacity of 2.6 million barrels per day.
-
Saudi Aramco runs the East-West pipeline, capable of handling 5 million barrels per day (expanded to 7 million in 2019). It was used more intensively in 2024 due to issues at Bab el-Mandeb.
-
The UAE manages a 1.8 million bpd pipeline connecting its oilfields to the port of Fujairah. Thanks to refinery upgrades in 2024, more heavy crude is processed locally, while lighter grades are exported through the pipeline—raising its utilization.
-
Iran launched the Goreh–Jask pipeline in 2021, reaching the Gulf of Oman. Its capacity is around 300,000 bpd, but by mid-2024 exports had dropped to 70,000 bpd, and by September shipments had halted.
Why a Hormuz closure would be disastrous
Chokepoints like the Strait of Hormuz are critical to global energy security. Even temporary blockages cause shipment delays and spike freight rates, leading to surging energy prices. Most chokepoints have alternative routes—but not Hormuz. A majority of oil from the Persian Gulf cannot be rerouted easily. Hormuz is the only deepwater route large enough to handle the world’s biggest crude carriers.
Blocking it would unleash a chain reaction the global economy is not prepared for. The lack of alternatives makes this route indispensable. According to Dutch ING, closing the strait could push oil prices above $120 per barrel—a level the world has not seen in years. OPEC+ spare capacity wouldn’t help much, as most of it is located in the same region.
Countries would be forced to dip into strategic reserves, but this would offer only a short-term buffer.
Oil is a strategic commodity tied to about 95% of all global goods production. A price surge would drive up inflation, hitting raw materials, food production, and manufacturing across the board.
A closure would trigger a global oil shock, fuel inflation, and plunge vulnerable economies into crisis. Central banks would face tough choices on interest rates. Insurance costs would soar, disrupting supply chains worldwide.
The impact wouldn’t be limited to oil. Qatar has already instructed LNG tankers to wait outside the strait amid the rising threat level. Qatar, the world’s third-largest LNG exporter, accounts for about 20% of global supply—all of it passing through Hormuz. While the market is currently balanced, any disruption would spark shortages and intensify competition between Asia and Europe.
Energy-deficient Asian countries would be hit hardest. A maritime blockade would freeze energy flows and slow economic growth from Asia to Europe. China gets nearly half its imported oil through Hormuz. India, Japan, and South Korea would also face serious disruptions and would have to tap into emergency reserves. Global shipping costs would spike, as tankers would be forced to reroute around Africa.
If Iran were to close the strait, it would suffer significant economic and military consequences. No country can wage war without foreign reserves, and a blockade would quickly drain them—making the move difficult to sustain.
Iran produces around 4.8 million barrels per day, exporting approximately 2.6 million. Despite U.S. sanctions, its crude and condensate exports have remained steady at 1.7 million bpd in 2025, mostly to China. Iran also exports about 800,000 bpd of refined products such as fuel oil, LPG, and naphtha.
Following Israel’s strike on the giant South Pars gas field, Iran suspended part of its gas production. The field has a capacity of 2 billion cubic meters of gas per day and produces 75,000 barrels of condensate. In response, Israel shut down over 60% of its own gas output—including the Leviathan field—due to security concerns.
According to the International Energy Agency (IEA), even a short-lived closure of the Strait of Hormuz would have serious consequences for the global oil and gas markets. The strait handles up to 25% of world oil flows and nearly all of OPEC+ spare capacity.
Fitch Ratings warns that in a worst-case scenario—such as a full-scale regional conflict or a prolonged Hormuz shutdown—oil prices could remain elevated well beyond current forecasts. In such a case, the long-term damage to regional credit profiles could outweigh any fiscal windfall from higher oil revenues.