Hormuz: The Battleground of Global Economy’s Lifeline

World 07:08 PM - 2025-06-23

The Strait of Hormuz.

Following recent U.S. attacks on Iran’s nuclear facilities, concerns have intensified over the potential closure of the Strait of Hormuz, a critical global oil transit route. This threat has already led to sharp increases in oil and fuel prices worldwide. Iran’s parliament has approved a measure to close the strait, a day after the attacks, although the final decision rests with the country’s Supreme National Security Council. The closure would have significant economic and political repercussions, provoking a global response and further destabilising the region.

Iran’s Strategic Response Options

In the wake of the U.S. strikes, Iran faces two principal options: to retaliate by targeting U.S. military bases in the region or to disrupt global oil exports by closing the Strait of Hormuz. While Iran has yet to pursue military action against U.S. bases, it has advanced the parliamentary approval to close the strait as a pressure tactic. However, as Ismail Kousari, a member of the Iranian parliament’s Commission on National Security and Foreign Policy, emphasised, “The final decision must be approved by Iran’s National Security Council.”

Geopolitical Importance of the Strait of Hormuz

The Strait of Hormuz, situated between the Persian Gulf and the Gulf of Oman, narrows to just 21 miles at its tightest point. It is the sole maritime passage for crude oil exports from the oil-rich Persian Gulf to the wider world, with Iran controlling the northern shore. The shipping lanes within the strait are even narrower—approximately 3 kilometres wide in each direction—rendering them highly vulnerable to disruption or attack.

Approximately 20 million barrels of oil, equating to around one-fifth of daily global production and 19% of the world’s oil demand, pass through the strait daily. Additionally, 11.1% of global maritime trade transits this corridor, underscoring its status as a vital artery connecting the Arabian Gulf to international markets. The U.S. Energy Information Administration (EIA) has designated the strait a “critical oil chokepoint.”

The majority of oil exports from regional powers—including Saudi Arabia, Iraq, the United Arab Emirates, Qatar, Iran, and Kuwait—depend on this narrow passage. While historically the West, primarily the U.S. and Europe, were most exposed to supply disruptions here, today China and other Asian economies would bear the brunt of any closure.

Economic Impact of a Potential Closure

Should Iran proceed with closing the Strait of Hormuz, global markets could face severe economic shocks. Experts predict Brent crude oil prices could rapidly exceed $150 per barrel, potentially reaching $200 or more if the closure persists for several weeks. Such price surges would drive up costs for petrol, heating, and air travel, while higher fuel prices would increase transportation expenses for goods, triggering inflation worldwide.

Goldman Sachs has highlighted the risks to global energy supplies, estimating that if oil flows through the strait were halved for one month and reduced by 10% for the subsequent 11 months, Brent crude could briefly peak at $110 per barrel. Prices would then moderate, averaging around $95 per barrel by the fourth quarter of 2025.

International Reactions

U.S. Secretary of State Marco Rubio has called on China to prevent Iran from closing the Strait of Hormuz, one of the world's most important shipping routes.

His comments came after Iran's state-run Press TV reported that parliament had approved a plan to close the Strait but added that the final decision lies with the Supreme National Security Council.

Any disruption to the supply of oil would have profound consequences for the economy. China in particular is the world's largest buyer of Iranian oil and has a close relationship with Tehran.

"I encourage the Chinese government in Beijing to call them [Iran] about that, because they heavily depend on the Straits of Hormuz for their oil," Rubio had said in an interview with Fox News on Sunday.

"If they [close the Straits]... it will be economic suicide for them. And we retain options to deal with that, but other countries should be looking at that as well. It would hurt other countries' economies a lot worse than ours."

Kirill Dmitriev, head of the Russian Direct Investment Fund (RDIF), stated on his X account that global oil prices are determined on an international scale, and if Tehran follows through with closing the strait, the U.S. will face “no mercy” when it comes to gasoline prices.

“No country will be shielded from the global oil shock,” Dmitriev wrote. “Gasoline prices will soar.”

Although Iran’s Supreme National Security Council has yet to decide on the closure, many analysts remain sceptical that Tehran will follow through. They caution that such a move would provoke an immediate U.S. response and inflict serious harm on Iran’s own economy, particularly its oil exports to key markets such as China.



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