What Happens if Strait of Hormuz is Closed? Understanding the Impact of Iran's Move on Oil Prices

Key Highlights

• “If it carries on for days with Iran and its proxies retaliating to the fullest extent, we are looking at the worst-case scenarios for oil, including a major disruption of oil flows through the Middle East,” she said, adding that much would depend on whether the United States could neutralize Iranian naval capabilities and keep tanker traffic moving through the Strait of Hormuz.
• The strait, which lies between Iran and Oman, connects the oil-producing states of the Persian Gulf — including Saudi Arabia, Iraq and the United Arab Emirates — to the Gulf of Oman and the Arabian Sea.
• Data from the analytics firm Kpler shows that about 13 million barrels of oil a day moved through the passage this year, accounting for roughly 31 percent of global seaborne crude flows.
• On Saturday, Reuters reported that an official with the European Union’s naval mission, Aspides, said commercial ships had received VHF radio messages from Iran’s Revolutionary Guards warning that “no ship is allowed to pass the Strait of Hormuz.” The official said Tehran had not formally confirmed any decision to close the waterway.
• Bob McNally, president of Rapidan Energy Group, described the latest developments as “a very serious development” for oil and gas markets, which are heavily dependent on supplies moving through Hormuz.