Strait of Hormuz Closure Disrupts Global Oil Supply

The Strait of Hormuz, a critical waterway connecting the Persian Gulf to the Gulf of Oman, is experiencing significant disruption due to escalating tensions and Iranian actions, impacting global energy markets and prompting international concern. A joint statement from 22 countries condemned recent Iranian attacks on merchant ships and civilian infrastructure, including oil and gas facilities, and acknowledged the de facto closure of the strait by Iranian forces.

Strategic Importance of the Strait of Hormuz

The Strait of Hormuz is a narrow passage, varying in width from approximately 21 to 60 nautical miles, separating Iran from the Musandam Peninsula shared by the United Arab Emirates and Oman [1]. It is the sole sea passage from the Persian Gulf to the open ocean, making it one of the world’s most strategically important choke points. Approximately 20% of the world’s liquefied natural gas (LNG) and 25% of seaborne oil trade pass through the strait annually [1], serving as a major source of petroleum products for Europe and Asia.

Recent Disruptions and Iranian Actions

Following attacks by the US and Israel on Iran on February 28th, Tehran has responded with strikes against its Gulf neighbors and commercial vessels within the strait. Data from Kpler indicates a drastic reduction in ship transits, with only 116 crossings between March 1st and 19th, a 95% decrease compared to peacetime averages.

Bypassing the Strait: Pipeline Alternatives

As the Strait of Hormuz faces effective closure, Gulf oil producers are increasingly relying on pipeline infrastructure to bypass the chokepoint [2]. Saudi Arabia is increasing flows through its East-West pipeline to the Red Sea port of Yanbu, while the United Arab Emirates is boosting exports via the Habshan-Fujairah pipeline, which connects onshore oil fields to the port of Fujairah on the Gulf of Oman [2].

Oil Exports Continue Despite Restrictions

Despite the disruptions, Iran has continued to export significant volumes of oil, exceeding 16 million barrels since the beginning of March, according to trade data and analytics platform Kpler [3]. Much of this oil is being shipped to China, often via vessels engaging in “dark” transits to evade Western sanctions and oversight [3]. Recent negotiations have also led to successful crossings by vessels with ties to India and Pakistan.

International Response and Calls for De-escalation

The 22 countries issuing the joint statement have expressed their readiness to contribute to efforts ensuring safe passage through the strait and called for an immediate moratorium on attacks targeting civilian infrastructure, including oil and gas facilities.

Key Takeaways

• The Strait of Hormuz is a vital global energy transit point, handling a significant percentage of the world’s oil and LNG.
• Iranian actions have severely disrupted shipping through the strait, leading to a dramatic decrease in transits.
• Gulf oil producers are utilizing pipeline infrastructure to mitigate the impact of the closure.
• Iran continues to export oil despite the restrictions, primarily to China.
• International calls for de-escalation and safe passage are growing.