Iran-US tension: What would the blockade of Strait of Hormuz mean for oil, LNG? | ExplainerNews

As tensions rise between Iran and the United States, one narrow waterway is moving to the center of global attention – the Strait of Hormuz.

The world’s largest warship, the nuclear-powered aircraft carrier USS Gerald R Ford, is on its way to the Gulf and joins one of the largest US military forces. buildup in the region since the 2003 invasion of Iraq. This time, Iran is in Washington’s sights.

Tehran signaled how it might respond to an attack this month when it announced the temporary closure of parts of the Strait of Hormuz, the narrow gateway that connects the Gulf to the open sea.

Iranian authorities have conducted live-fire military exercises in the corridor, through which about 20 percent of global oil supplies are shipped.

The move was a rare suspension of activity in parts of the strait. It served as a stark warning about the economic consequences if Washington follows through on its threats to attack Iran, underscoring how quickly a regional confrontation can spill over into global markets.

Where is the Strait of Hormuz?

The Strait of Hormuz is the world’s most critical oil choke point.

The curved waterway lies between Iran in the north and Oman and the United Arab Emirates in the south. It is about 50 km (31 mi) wide at its entrance and exit and narrows to about 33 km (20 mi) at its narrowest point. It forms the only maritime connection between the Gulf and the Arabian Sea.

Despite its narrow width, the canal accommodates the world’s largest crude carriers. Major Middle Eastern oil and gas exporters rely on moving supplies to international markets while importing countries depend on their uninterrupted operation.

How much oil and gas passes through the strait?

According to the US Energy Information Administration (EIA), about 20 million barrels of oil passed through the Strait of Hormuz every day in 2024. This equates to nearly $500 billion in annual energy trade, underscoring the waterway’s central role in the global economy.

The crude oil passing through the strait comes from Iran, Iraq, Kuwait, Qatar, Saudi Arabia and the UAE.

Any prolonged disruption will rattle producers and the economies that depend on their exports.

The strait also plays a critical role in the trade in liquefied natural gas (LNG). In 2024, about a fifth of global LNG shipments moved through the corridor, with Qatar accounting for the vast majority of those volumes, according to OIA data.

Where is it all going?

The strait handles LPG flows in both directions. Kuwait and the UAE import supplies sourced outside the Gulf, including shipments from the US and West Africa.

The EIA estimated that in 2024, 84 percent of crude oil and condensate shipments transiting the strait would go to Asian markets. A similar pattern appears in the gas trade with 83 percent of LNG volumes passing through the Strait of Hormuz destined for Asia.

China, India, Japan and South Korea accounted for a combined 69 percent intake of all crude oil and condensate flows through the strait last year. Their factories, transport networks and power grids depend on uninterrupted Gulf energy.

What are Iran’s options?

Under international law, states may exercise sovereignty up to 12 nautical miles (22km) from their coastlines. At its narrowest stretch, the Strait of Hormuz and its designated shipping lanes fall entirely within the territorial waters of Iran and Oman.

That legal reality gives Tehran geographic leverage. Around 3,000 vessels ply the strait every month. If Iran sought to impede traffic, one of the most effective tactics would involve deploying naval mines using fast attack boats and submarines.

Tehran’s navy includes fast boats equipped with anti-ship missiles, alongside surface vessels, semi-submersibles and submarines designed for asymmetric warfare.

Iran’s the parliament last year passed a motion to close the Strait of Hormuz. Any final decision rests with Supreme Leader Ali Khamenei.

Regional dynamics can further complicate the situation.

In Yemen, the Houthi group, which maintains close ties to Iran, may again seek to disrupt traffic through the Bab al-Mandab Strait, another vital maritime choke point linking the Red Sea to global trade routes. Shipping through that corridor suffered significant disruption after Israel’s genocidal war against Gaza began in October 2023.

The Houthis, who recently controlled northwestern Yemen, including the capital, Sanaa organized a mass rally under the slogan Steady and ready for the next round, indicating readiness for a potential confrontation with domestic or foreign adversaries.

Any coordinated pressure on the Strait of Hormuz and Bab al-Mandab Strait will intensify risks to global shipping, energy markets and international trade.

Impact on global oil prices

Colby Connelly, head of Middle East content at Energy Intelligence, told the UAE’s Al Jazeera that a full or partial closure of the Strait of Hormuz would have a “major impact on oil prices in the near term” depending on how long the strait remains contested.

“There are no other major sources of supply that can make up for what’s coming out of the Gulf, especially given that about 70 percent of OPEC+ is putting extra production capacity in the Gulf,” Connelly said, referring to the group of oil-producing countries that collectively set production volumes.

Saudi Arabia relies heavily on the strait to export its crude oil, which sends about 5.5 million barrels a day through the corridor – more than any other country in the region, according to OIA data.

Iran’s oil exports, about 90 percent of which go to China, averaged about 1.7 million barrels per day in the first half of 2025, according to the EIA.

“Saudi Arabia and the UAE both have limited pipeline capacity that could allow exports to continue via the Red Sea coast and Fujairah,” a UAE port on the Gulf of Oman warned Connelly.

While some Gulf producers hold significant volumes in overseas storage that can cushion supply shocks, Connelly noted that buffers may be limited in the face of severe disruptions. He warned: “Oil prices have been highly reactive to geopolitical tensions in recent weeks, and as a result prices could rise to over $100 a barrel if there were to be a major disruption.”

Impact on global economy

Any disruption to energy flows through Hormuz would increase fuel and factory costs, especially as China relies on manufacturing and exports to maintain its economic growth.

Higher energy prices will increase production costs, with companies likely to pass those costs along supply chains and to consumers.

“This is going to have serious inflationary consequences for the world economy,” warned Samuel Ramani, a fellow at the Royal United Services Institute in the United Kingdom.

The consequences will extend beyond China. Several major Asian economies are highly dependent on shipments transported through the strait.

Almost half of India’s crude oil imports and about 60 percent of its natural gas supplies pass through the Strait of Hormuz. South Korea obtains about 60 percent of its crude oil via the same route, while Japan relies on it for nearly three-quarters of its oil imports.

“For the Gulf countries in particular, this is going to cause a lot of disruption,” Ramani told Al Jazeera. “I was recently in the UAE, and investors in Dubai are worried about what this would mean for the tourism and financial sector. This could cause some investment conflicts in some of the Vision 2030 projects in Saudi Arabia.”

“There are many, many layers of concern here, not just exports and prices, but also broader macroeconomic and microeconomic ramifications. So we have to view this as a very serious adverse financial development,” Ramani added.