Jerusalem: As tensions between Iran and Israel escalate, with United States likely being drawn into a broader conflict, Strait of Hormuz has once again emerged as a focal point of international concern. This narrow strip of water, located between Persian Gulf and the Gulf of Oman, plays an essential role in the global oil supply chain.
In any scenario of armed confrontation involving Iran, the control and security of this strategic waterway could significantly impact global energy markets.
Where is Strait of Hormuz located?
Strait of Hormuz lies between Iran to the north and the United Arab Emirates and Oman to the south. Though the total width of the strait at its narrowest point is about 21 miles (34 kilometres), the actual channels used by ships for safe passage are just a few kilometres wide in each direction. This makes it one of the most vulnerable and tightly controlled maritime passages in the world.
Several critical ports are located nearby, including Iran’s Bandar Abbas, the UAE’s Fujairah, Oman’s Sohar, and Qatar’s Ras Laffan, each playing a vital role in oil, gas, and trade operations.
What makes Strait of Hormuz important?
What makes the Strait of Hormuz strategically vital is its role as a global energy gateway. Almost one-fifth of the world’s oil, around 20.9 million barrels per day, passes through it, according to US Energy Information Administration.
The strait is the only sea route available for energy exports from countries such as Saudi Arabia, Iraq, Kuwait, Iran, Qatar, and UAE. A staggering 83% of the oil that moves through the strait is headed for Asian markets, including India, China, Japan, and South Korea.
The threat of Iran blocking or limiting access to the strait is not new. Tehran has repeatedly used it as a bargaining chip in geopolitical standoffs. However, the current climate of missile and drone strikes between Iran and Israel has raised fears of a direct military confrontation, according to India Today reports.
Should the US become more deeply involved, either militarily or through sanctions, Iran may once again consider disrupting traffic through the Strait of Hormuz as a retaliatory measure.
Even without an actual blockade, rising military tensions have already caused alarm in global markets. Insurance premiums for commercial ships traveling through the region are increasing, shipping companies are considering alternate and longer routes, and concerns about delays are mounting. The geopolitical uncertainty alone is enough to push up oil prices and raise the cost of global energy.
According to Ankit Patel, Partner at Arunasset Investment Services, the response of global powers will be critical. “The extent to which global powers can dissuade Iran from blocking this vital passage will determine the scale of impact on oil markets going forward. Even without further escalation, the geopolitical risk premium on oil is likely to persist,” he said.
