The Strait of Hormuz: Why This Narrow Waterway Could Shake Global Oil Markets

Rising Tensions in the Middle East Spark Fears Over a Vital Oil Route

As conflict escalates between Iran, Israel, and the United States, investors are keeping a close eye on a critical global chokepoint: the Strait of Hormuz. Although global oil supply hasn’t yet been disrupted, recent airstrikes targeting Iranian sites have driven oil futures up by nearly 10%, fueled by fears that Iran may retaliate by blocking or threatening this crucial waterway.

What Is the Strait of Hormuz?

Located between the Persian Gulf and the Gulf of Oman, the Strait of Hormuz is one of the most strategically vital maritime passages in the world. At its narrowest, it spans just 21 miles, yet it's the only sea route through which crude oil from the Persian Gulf can be transported to international markets.

The strait handles the flow of around 20 million barrels of oil per day — nearly 20% of the world's daily supply, according to the U.S. Energy Information Administration (EIA). Due to its importance, the EIA refers to it as a “critical oil chokepoint.”

Iran controls the northern side of the strait and has repeatedly used its geographic position to project influence — or issue threats — during periods of regional tension.

Oil Markets React to Risk of Disruption

Following recent U.S. airstrikes on Iranian nuclear facilities, Brent crude prices briefly surged above $80 per barrel, the highest since January. Although prices later eased during Asian trading, the geopolitical uncertainty continues to weigh heavily on the market.

• Brent crude settled slightly lower at $76.49

• WTI fell to $73.38

According to Rob Thummel, senior portfolio manager at Tortoise Capital, if Iran disrupts traffic through the Strait of Hormuz, oil prices could quickly spike to $100 per barrel.

Could Iran Really Block the Strait?

Iranian officials have hinted at the possibility of closing the Strait. A top adviser to Iran’s supreme leader, Hossein Shariatmadari, warned, “Following America’s attack on the Fordow nuclear installation, it is now our turn,” implying that retaliation could involve targeting global oil flows.

However, many analysts believe a full closure remains unlikely. Vandana Hari, CEO of energy intelligence firm Vanda Insights, called it a “remote tail risk,” citing:

• The strong U.S. naval presence in the region as a deterrent

• Iran’s economic dependence on trade routes through the same strait

• The risk of alienating neutral countries and major buyers like China

In short, blocking the strait would hurt Iran's allies and oil customers just as much as its adversaries.

Why the Strait of Hormuz Matters for Asia

While much of the focus is on U.S.-Iran tensions, the real economic threat lies in Asia. According to the EIA, 84% of crude oil and 83% of liquefied natural gas (LNG) that passed through the strait last year was shipped to Asian markets.

Top importers include:

• China: 5.4 million barrels/day

• India: 2.1 million barrels/day

• South Korea: 1.7 million barrels/day

In contrast, the U.S. and Europe import far less oil via the strait — just 400,000 and 500,000 barrels per day, respectively.

Asian governments are already responding:

• China emphasized the need for regional stability and urged diplomatic solutions.

• India reassured markets, noting its efforts to diversify oil imports and maintain reserves for several weeks.

What's Next? Geopolitics, Oil Prices, and Global Risk

Whether or not oil prices continue rising will depend on Iran’s next move. If the country were to take concrete action to block the Strait of Hormuz, the global oil market could face its most severe supply shock in years.

Analysts warn that any disruption could lead to:

• A surge in inflation globally

• Supply chain instability, especially in Asia

• Increased volatility in energy stocks and oil ETFs

For now, the presence of U.S. naval forces and Iran’s economic interests appear to reduce the likelihood of a full blockade. Still, in a highly volatile region, even small incidents can have major ripple effects.

Key Takeaways for Investors and Energy Watchers

• The Strait of Hormuz is the most critical oil chokepoint in the world.

• About 1 in 5 barrels of global oil pass through it daily.

• Geopolitical risks involving Iran could send prices soaring toward $100.

• Asia is most exposed to potential disruptions, while the U.S. and Europe are less directly dependent.

• Oil markets remain on edge, and volatility is likely to persist.