Strait of Hormuz Closure: Oil Prices Surge as Iran Escalates Tensions

The Strait of Hormuz, a critical chokepoint for global oil supply, has been effectively closed by order of the Iranian government amid escalating conflict with Israel and the United States. This move, announced on March 1, 2026, is already impacting oil prices and raising concerns about global energy security.

Strategic Importance of the Strait of Hormuz

Located between Iran and Oman, the Strait of Hormuz connects the Persian Gulf to the Gulf of Oman and the Arabian Sea. It is a narrow waterway, only 33 kilometers (21 miles) wide at its narrowest point, with designated shipping lanes just 3 kilometers (2 miles) wide. Despite its limited width, it remains a vital international transit route, facilitating approximately 20% of the world’s total oil supply .

Oil Price Reaction

The closure has already triggered a significant increase in oil prices. West Texas Intermediate (WTI) crude oil briefly reached $75.33 a barrel, a 12% gain from Friday’s close . Analysts predict further price increases depending on the duration of the closure.

• Equirus: Estimates a price rise to $76–$81 per barrel if Iran’s 3.3 million barrels per day of supply is disrupted .
• Dolat Capital: Projects a potential price of $100 per barrel if the Strait of Hormuz remains shut down .

Global Impact and South Korea’s Response

The closure impacts not only oil prices but also global trade. Qatar, the world’s largest exporter of liquefied natural gas (LNG), relies almost entirely on the Strait of Hormuz for its shipments .

South Korea, heavily reliant on Middle Eastern energy imports – approximately 70.7% of its oil and 20.4% of its LNG – is actively seeking to diversify its oil supply sources . The government announced on Tuesday, March 3, 2026, its intention to secure oil supplies from regions outside the Middle East . The country currently holds sufficient oil reserves to mitigate a prolonged crisis .

Recent Developments

On Monday, the Islamic Revolutionary Guard Corps declared the Strait of Hormuz closed and threatened to attack any ships attempting passage . While Iran has not officially confirmed the order, reports indicate ships in the Gulf are receiving warnings from Iran’s Revolutionary Guards .

The South Korean government is monitoring domestic and global energy and financial markets and has prepared a market stabilization program of at least 100 trillion won (US$68.4 billion) if needed . The Korea Composite Stock Price Index (KOSPI) experienced a significant drop, falling over 7% on Tuesday amid heightened concerns .