What if Iran closes the Strait of Hormuz

Iran’s attack on Israel worsened the already difficult situation in the Middle East. Escalation could also lead to new frictions in the Strait of Hormuz.

The war between Israel and the Palestinian movement Hamas in the Middle East is joined by an escalation between Israel and Iran, with the first direct Iranian missile attack on Israeli territory. After Yemen’s Houthis attacked merchant ships in the Bab el-Mandeb strait, which crippled supply chains through the Suez Canal from December last year to March this year, a new threat to global trade could emerge in the volatile Strait of Hormuz.

The Iranian attack on Israel was in response to the Israeli bombing of the Iranian embassy in Damascus on April 1st. But missiles and drones over Israel were not Iran’s only response.

In the passage that connects the vast oil and gas deposits in the Persian (Arabian) Gulf to global markets, Iran’s Revolutionary Guards boarded a merchant ship on April 13th that authorities said had ties to Israel, the Associated Press reported. It was the MSC Aries ship, which sailed under the Portuguese flag and is said to be linked to Israeli businessman Eyal Ofer.

Iran also mentioned the possibility of closing the passage. Threats of this type are a common tactic of Iran in disputes with the United States (U.S.) or the wider international community, but so far it has not carried them out. The latest incidents took place in 2018 and 2019, after the withdrawal of the U.S. from the Iran nuclear agreement and the announcement of new sanctions against the Iranian regime by then-U.S. President Donald Trump.

Two oil tankers were attacked while passing by, for which Iran did not claim responsibility. In June 2019, in response to the seizure of an Iranian tanker near Gibraltar, the Iranians seized the British tanker Stena Impero.

The Strait of Hormuz is located between Iran and the Musandam Peninsula, an exclave of Oman surrounded by the United Arab Emirates. The width of the seaway at its narrowest point is 21 nautical miles or 39 kilometers, which belongs to the territorial waters of Iran and Oman.

The United Nations Convention on the Law of the Sea (UNCLOS) allows the so-called harmless passage of ships through the territorial seas of countries that extend 12 nautical miles or 22 kilometers from the coast. In the case of strategically important passages, such as Hormuz, transit for military ships is also allowed.

A route for a fifth of the world’s oil and gas demand

About a fifth of the world’s oil demand and a fifth of all liquefied natural gas (LNG) travel through the canal. The Persian Gulf contains roughly half of the world’s oil reserves, as well as the world’s largest natural gas field, the South Pars/North Dome, shared by Qatar and Iran. Apart from them, Saudi Arabia, Iraq, Kuwait, and the United Arab Emirates draw oil and gas in the Gulf.

If the situation gets worse in the region, Saudi Arabia and its OPEC+ allies have more than five million barrels per day of spare production capacity. That could make up for any downtime. The group vowed to remain vigilant if markets tighten this summer.

Iran has an oil terminal in the Gulf of Oman

The Emirates connected their deposits in Abu Dhabi to the port of Fujairah in the Gulf of Oman, and the Saudis built an oil pipeline between the oil fields along the Persian Gulf and the port of Yanbu in the Red Sea already in the 1980s. In 2019, it was briefly disabled by an attack by Iran-backed Yemeni Houthis.

Among these countries is – perhaps surprisingly – Iran, which most often threatens to close the bottleneck. In September 2021, Iran opened its first oil terminal in the port of Jask in the Gulf of Oman. This means that the outgoing tankers do not cross the Strait of Hormuz, Forbes writes.