Iran closed the Strait of Hormuz on Sunday, cutting off nearly one-fifth of global oil traffic, after the United States bombed its nuclear and missile facilities in a pre-dawn air campaign. The airstrikes, which followed Israeli attacks that destroyed much of Iran’s missile infrastructure, were ordered just after midnight and executed under direct authorization from President Donald Trump. Tehran’s parliament voted the same day to block passage through the strait, triggering immediate fears across global energy markets. This decision affects tankers transporting oil and gas from the Persian Gulf to key regions including China, Europe, and South Asia, and threatens to send crude prices sharply higher once markets reopen later tonight. The Iranian regime responded swiftly after Israeli strikes hit multiple targets tied to Iran’s nuclear program and military command centers earlier this week. Despite the blow to Iran’s arsenal, Supreme Leader Ali Khamenei refused to step back and promised “irreparable damage” to any US intervention. Iran had issued several threats in the last ten days following what it claimed was an unprovoked Israeli assault. The vote in parliament to close Hormuz followed those warnings and was backed by Khamenei himself. Why the Strait of Hormuz matters so much The Strait of Hormuz sits at the mouth of the Persian Gulf and has long been considered one of the world’s most critical oil routes. Tankers moved around 16.5 million barrels of crude and condensate per day through the passage in 2024. That includes shipments from Saudi Arabia, Iraq, the UAE, Kuwait, and Iran. The strait is also the path for over 20% of global liquefied natural gas, most of which comes from Qatar. Shipping operators and governments had already started reacting before Sunday. The UK government issued a rare warning to commercial vessels passing through the region, saying increased hostilities could disrupt shipping. Frontline Ltd., one of the largest oil-tanker operators, confirmed it would be more cautious offering tankers in the area. Iran has attacked merchant ships in the strait before, and the buildup of threats after the Israeli strikes raised clear alarm bells across the maritime and energy sectors. There is no international law that lets Iran block Hormuz , so the move is being enforced purely through military pressure. But Iran doesn’t have to send out its navy. Officials have several alternatives: fast patrol boats, drone attacks, and coastal missile strikes. Those tactics are enough to make passage through the strait unsafe for commercial traffic. The US Fifth Fleet, along with European naval forces, has maintained a presence in the region, but the risk has already forced some shippers to delay or reroute their cargoes. Global shipping slows as oil prices react Disruptions aren’t limited to the Gulf though. Shipping through the Red Sea and Gulf of Aden has dropped roughly 70% in June compared to normal levels seen in 2022 and 2023. A US-led force has been deployed in those waters to protect vessels, but rerouting traffic around Cape of Good Hope in South Africa has become the more viable option. That path adds both time and cost to shipments heading between Asia and Europe, which could push up inflation if the situation doesn’t ease. But the move isn’t risk-free for Iran. Shutting the strait hurts its own export economy. Iran depends heavily on shipping oil out of the Gulf. It opened a facility at Jask, on the eastern edge of Hormuz, in 2021 to ease reliance on the main channel, but its capacity is limited. The decision could also backfire diplomatically, especially with China, its top oil customer. China has used its UN Security Council veto in the past to defend Iran from Western sanctions , but that support could be tested if China’s energy needs are compromised. Countries like Saudi Arabia and the UAE are more flexible. Riyadh can send oil via a 746-mile pipeline that links its oil fields to the Red Sea, avoiding both Hormuz and the conflict-heavy southern Red Sea. The UAE moves around 1.5 million barrels a day through a pipeline that reaches Fujairah on the Gulf of Oman. But Iraq, Qatar, Kuwait, and Bahrain don’t have these alternatives. Their oil has to go through Hormuz, and most of it goes straight to Asian markets. Analysts from SEB and Saxo Bank also predicted a $3–$5 per barrel increase in Brent crude, which closed Friday at $77.01. West Texas Intermediate ended at $73.84. Ole Hansen from Saxo Bank added that prices could open $4 to $5 higher if traders unwind long positions. Since June 13, when Israel launched its first major strike on Iranian nuclear sites, Brent crude has risen 11% and WTI has climbed 10%. So far, oil’s upward movement has been capped by OPEC’s spare capacity and steady production levels. But if Iran keeps Hormuz closed and military tensions escalate, those buffers won’t last. Cryptopolitan Academy: Want to grow your money in 2025? Learn how to do it with DeFi in our upcoming webclass. Save Your Spot
