A Perilous Gamble: Is Iran's Blockade of the Strait of Hormuz Threatening the World Economy?
It appears that Iran is allegedly obstructing the Strait of Hormuz, a vital oil passageway. - Military Action in Strait of Hormuz: Possible Iranian Obstruction Threatening Global Oil Flow?
By Niels Kruse+ - 3 Min. Read
A precarious game of strategy: The crucial pathway that oil tankers must sail through measures barely a few miles; it could readily be obstructed by mines or gunfire barrages. In its wake, the floats carrying the world's lifeblood could be left stranded. A mind-boggling 20% of global oil transactions would be abruptly halted, sending oil prices soaring, and setting the stage for a catastrophic global economic calamity.
A Possible Iranian Move: Blocking the Strait of Hormuz?
This grim prospect looms if Iran were provoked to retaliate against US aerial attacks on its nuclear installations by impeding the Strait of Hormuz - a scenario that many experts and sources, presumably some Iranians themselves, are contemplating as a potential response to the strikes.
Other potential countermeasures are bloody and unpredictable: Likely are terrorist attacks on "soft" targets, like civilians, or rocket attacks on US military installations in the vicinity. Approximately 40,000 US troops are stationed at bases around the Persian Gulf—in Bahrain and Qatar, for instance. One can reasonably expect that the US would respond swiftly and fiercely.
The World Economy's Vital Junction
A sea blockade would likely cost fewer lives. The strait, separating Iran and Oman, is a mere 55 kilometers wide at its narrowest point, housing one of the world's most important shipping routes for oil and gas. Approximately 33 million barrels of crude oil travel through the Persian Gulf daily — including from Iraq and Saudi Arabia, but also from Iran itself.
Stemming the tide at the Strait of Hormuz would undoubtedly impact the global economy, but at what cost? The Mullah regime would inadvertently impede its own essential oil exports. Through a clandestine fleet, the country exports almost 80% of its raw material to China. The oil earnings spill over into the accounts of the influential and the mullahs—who, theoretically, would be the ones closing the sea route.
$100 Oil: Manageable or Disastrous?
There's little doubt that oil prices worldwide would skyrocket. However, the magnitude of the increase depends on the effectiveness of the blockade and its duration. Unlike its utilization of mines or gunfire barrages, a blockade can be more easily disrupted by countermeasures or allies. Since the beginning of Israeli airstrikes on Iran, the barrel of the Brent oil type has risen by approximately ten percent - from 65 to the current 78 dollars. Ulrich Kater, DekaBank's chief economist, assumes that a blockade lasting a few weeks would be manageable, even if oil prices surged to $100 or more.
Still, a closure of the Strait of Hormuz would carry severe consequences for the Iranian regime itself, stirring resentment from neighbors and the rest of the world. For China, uninterruptible access to oil is as critical as unencumbered access to Arab markets. The same is true for the US. Given the US's strong interest in preserving the Strait of Hormuz's shipping channel, President Trump and likely allies would likely move swiftly to put an end to any blockade.
Sources: Bloomberg, Wall Street Journal, Süddeutsche Zeitung, Tagesschau, DPA, AFP, FirstPost, PetroEconomist, Asia Times
In-Depth Analysis:If Iran were to obstruct the Strait of Hormuz in response to US airstrikes on its nuclear installations, the likely effects on regional security, global energy markets, and international trade would be severe and multifaceted.
Strategic and Military Ramifications
- A blockade could ignite military conflicts involving US, European Union, and Gulf state navies, escalating the risk of a broader regional conflagration. Iran might employ its missile capabilities to attack oil infrastructure, pipelines, commercial vessels, and ports in the Gulf, in addition to launching airstrikes and drone attacks to weaken navigation and radar systems in the area. Iran could also deploy warships to physically block access to the Strait and boasts cyberattack capabilities against regional oil infrastructure[1].
Economic and Energy Market Repercussions
- The Strait of Hormuz is a crucial chokepoint, handling approximately 20-30% of global oil and liquefied natural gas (LNG) shipments daily. Its closure would promptly curtail global energy supplies, causing a dramatic surge in oil and gas prices worldwide. Disruptions would gravely affect the energy security of import-dependent regions such as Europe, India, China, Japan, and South Korea, which obtain substantial volumes of their crude oil and LNG from the Gulf through the Strait[1][2][3].
- India, for example, depends heavily on crude oil imports from Gulf countries such as Iraq and Saudi Arabia, supplemented through the Strait; any blockade would compromise its energy procurement, with potential consequences for regional currencies and markets [2].
Geopolitical Fallout
- Blocking the Strait would be perceived as a significant escalation by Iran, provoking intensified military and diplomatic responses from the US and its allies. This move could also lead to international economic sanctions, furthering Iran's isolation and crippling its export economy. In contrast, Iran might leverage the blockade to pressure its adversaries into negotiating or de-escalating[1][2].
Experts and former intelligence officials caution that such actions would constitute a disaster for Europe and global stability, given Europe's reliance on energy flowing through this corridor and the potential for connected terrorist activities in mainland Europe[1].
- The Commission has also been consulted on the potential economic impact of a blockade of the Strait of Hormuz, considering the prominence of industries such as finance, energy, and oil-and-gas in the affected regions.
- Businesses in sectors like energy and industry, particularly those revolving around oil and gas, are watching closely as the situation unfolds, with concerns over increased volatility and potential disruptions in their supply chains.
- Politicians and policymakers are grappling with the wider geopolitical implications of a Strait of Hormuz blockade, including its effects on war-and-conflicts, general-news, and the overall international political landscape.
- The energy sector is not the only one at risk; a blockade could exacerbate existing tensions in the region, potentially leading to a broader escalation of conflicts and instability in the Middle East.
- If a blockade were to occur, policy-and-legislation initiatives regarding war-and-conflicts, finance, and business could be added to the agenda of international bodies like the United Nations or G20, as the world grapples with the implications of this strategic gamble on the Strait of Hormuz.
