Key Points – Following the US strikes on its nuclear facilities, Iran has threatened to close the Strait of Hormuz, a critical chokepoint for global energy supplies through which 20% of the world’s oil transits daily.
-While the Iranian Parliament has reportedly approved a measure to close the sea lane, analysts believe a full closure is unlikely as it would also cripple Iran’s own economy.
-Instead, Iran may resort to harassment tactics, using mines, drones, and speedboats to disrupt shipping. A closure would have severe economic consequences, potentially spiking oil prices to over $100 a barrel and reducing global GDP.
Would Iran Dare Close the Strait of Hormuz?
Following American strikes on Iran’s nuclear facilities, including the historic B-2 bombing of the Fordow enrichment facility, oil and energy analysts have expressed fear that Iran could retaliate by closing the Strait of Hormuz.
On Sunday, Iranian state media confirmed that the Iranian Parliament approved a measure to close the sea passage, which connects the Persian Gulf to the Gulf of Oman and the Indian Ocean. While it remains to be seen whether Iran will move forward with the plans, some experts are warning that instead of a full closure, Iran may engage in harassment tactics, including mining or boarding vessels, as part of an effort to disrupt trade.
The Strait of Hormuz serves as the only maritime outlet for Gulf oil. Approximately 21 million barrels of oil pass through the strait per day, along with as much as one quarter of global liquified natural gas (LNG).
Why the Strait of Hormuz Matters
Logistics aside, closing the Strait of Hormuz would cause major global trade and energy disruptions.
According to the U.S. Energy Information Administration, roughly 20% of global petroleum liquids consumption depends on the strait remaining open, and disruption to this access could cause significant increases in global oil prices. Oxford Economics, a major global economic advisory firm, estimates that oil could spike to over $100 per barrel – an estimate supported by forecasts from Goldman Sachs and JPMorgan.
Economists also believe that a serious blockade could shave 0.8 percentage points off global GDP.
Beyond global trade, closing the strait would also increase shipping insurance premiums even further. Insurance premiums for ships transiting the strait have already increased by 60% since Israel first launched strikes against Iran. Marsh McLennan, the largest insurance broker in the world, confirmed that the cost of machinery and hull insurance for vessels using the sea passage has already risen from 0.125% of a ship’s value to 0.2%.
Rising shipping insurance premiums will have a significant impact on trade, requiring shipping companies to pay more and likely causing a knock-on effect on consumer prices. Added costs of transporting goods are passed along the supply chain, first to importers and exporters, then to manufacturers and retailers, and ultimately to consumers. Fewer ships will also be willing to use the route, not just because of rising rates, but because of the heightened risk of their ships being intercepted by the Iranians.
China’s Foreign Ministry responded quickly to the reports, with a Foreign Ministry spokesman calling on the international community to work to de-escalate the conflict and ensure the strait remains open.
“The Persian Gulf and its surrounding waters are important international trade routes for goods and energy,” Guo Jiakun said in a daily news briefing on Monday.
And while China urges the United States and its allies to de-escalate, Washington is pushing China to exert its own influence. Speaking to Fox News on Sunday, U.S. Secretary of State Marco Rubio urged China to step in and request that the shipping lane remain open, citing the large quantities of oil that pass through the strait.
“If they do that, it will be another terrible mistake. It’s economic suicide for them if they do it. And we retain options to deal with that. But other countries should be looking at that as well. It would hurt other countries’ economies a lot worse than ours. It would be, I think, a massive escalation that would merit a response, not just by us, but from others,” Rubio said.
Can Iran Do It?
The question now is whether or not Iran is capable of following through on its threat. Speaking to the Financial Times, Sid Kaushal, a naval warfare expert at the Royal United Services Institute in London, argued that there may now be a race between the United States and Iran to take control of the strait.
“Much depends on factors like whether [Iran] can lay mines before the US can bomb stockpiles and how survivable their coastal anti-ship missile batteries are,” Kaushal said. “Eventually the US will break through. But if the Iranians move first, it could be costly, time consuming and potentially not without casualties.”
A report by the Foundation for Strategic Research suggests that, should Iran close the strait, it would involve the deployment of drones, speedboats, helicopters, and 2,000 naval mines. The report also adds weight to suggestions that Iran may use intimidation and harassment tactics to disrupt trade, rather than closing it completely, citing a video published in September 2023 by Alireza Khalili, the director of the office of the Iranian ambassador to France.
In the clip, Iranian marksmen are seen jumping from an Mi-171E helicopter and landing on an Iranian military vessel. The clip followed a number of incidents involving Iranian commando operations, including one 2019 incident that saw a commando operation take control of a British-flagged ship.
If Iran were to follow through on its threats, we likely know how they’ll do it – but what we don’t know is how the world will respond.
About the Author:
Jack Buckby is a British author, counter-extremism researcher, and journalist based in New York. Reporting on the U.K., Europe, and the U.S., he works to analyze and understand left-wing and right-wing radicalization, and reports on Western governments’ approaches to the pressing issues of today. His books and research papers explore these themes and propose pragmatic solutions to our increasingly polarized society. His latest book is The Truth Teller: RFK Jr. and the Case for a Post-Partisan Presidency.
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