Iran has ‘closed’ the Strait of Hormuz after the US and Israel attacked it last week, causing oil and gas prices to spike. But how long can Iran realistically block this critical passageway, which connects the Persian Gulf to the Arabian Sea and carries a fifth of global oil, gas and fertilizer shipments?
Mint explores the best- and worst-case scenarios.
Has Iran shut the Strait of Hormuz?
On Monday the Islamic Revolutionary Guard Corps (IRGC), a branch of Iran’s armed forces, announced that the Strait of Hormuz was closed and attacked a few ships passing through it. The announcement quickly caused panic. Most shipping lines have since suspended crude oil, fuel and liquefied natural gas shipments through the strait. On Monday, only 28 vessels transited the shipping lane, against the daily average of 138. Oil prices have jumped sharply and crossed $80 per barrel.
Has Iran ever closed the strait before?
Iran has never shut the strait for an extended period, though it has threatened to do so several times since the Islamic Revolution in 1979. Experts say, however, that this time is different. The Iranian regime is considerably weaker and closing the strait is its best way to inflict pain on the US, its Arab neighbours and the rest of the world in the form of high oil prices.
Iran may not be able to implement a total physical blockade because of the strong US naval presence there, but it can scare ships away with targeted missile attacks.
What happens if the blockade does not end quickly?
Countries such as Saudi Arabia, Iraq, Qatar, Kuwait and the United Arab Emirates (UAE) depend on this sea link to evacuate their oil and gas, so experts fear an extended disruption could send oil prices above $100 per barrel. Gas prices in Europe have already shot up significantly.
Can Iran effect a long-term blockade?
That will depend on its residual military capabilities after massive strikes by the US and Israel, what the new leadership wants, and whether there will be a change of regime.
However, the strait is a double-edged sword for Iran. While it is a powerful strategic lever, a total shutdown would also paralyze the Iranian economy as nearly 95% of its oil exports—about 1.6 million barrels per day, destined primarily for China—pass through these waters. China gets the bulk of its crude needs from West Asia and will certainly pressure Iran, its ally, to reopen the strait if the closure continues.
How will this affect India?
India, like China, is highly vulnerable to any long term disruption of crude oil supply from West Asia. In January, 55% of its oil purchases, roughly 2.74 million barrels a day, came from this region.
India is also scaling back its reliance on Russian crude. Market share has plummeted from 33% last year to just 19.3% in January—marking a 44-month low for Russian imports. Iraq, Saudi Arabia and UAE are its major suppliers. While India can ramp up Russian crude purchases, higher oil prices will increase its import bill and fuel inflation.