When geography meets geopolitics

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The Strait of Hormuz – a mere 21 nautical miles wide at its narrowest point – is a passage so narrow, yet so powerful, that a single disruption here can jolt the arteries of the global economy.

Located between the Persian Gulf and the Gulf of Oman, the Strait of Hormuz serves as the primary maritime gateway for the world's energy supply. Roughly one-fifth of the global oil trade, an estimated 17 million barrels of oil pass through it daily. In 2024, oil flow through the strait averaged 20 million barrels per day (b/d), or the equivalent of about 20% of global petroleum liquids consumption.

Exporters including Saudi Arabia, Iran, Iraq, Kuwait, the United Arab Emirates and Qatar rely on this maritime passage to access international markets. The strait is also a major route for non-oil shipping, linking Gulf economies to Asia, Africa and Europe.

While some infrastructure exists to bypass the strait, such as overland pipelines through Saudi Arabia and the UAE, these alternatives have limited capacity and cannot fully substitute for Hormuz. As a result, the strait remains a strategic chokepoint, where even minor disruptions can impact global energy prices and shipping insurance markets.

The importance of the Strait of Hormuz is not limited to the Middle East. Asian economies such as China, Japan, India and South Korea are heavily reliant on energy imports from the Gulf, and any sustained disruption could affect global manufacturing and inflation. Similarly, European and North American markets are tied into the same global supply chains, making stability in the strait a shared international interest.

Control over the strait is geographically shared. The northern shore belongs to Iran, while the southern side is part of Oman, specifically its Musandam exclave. The navigable shipping lanes within the strait fall under territorial waters, but transit is governed by the United Nations Convention on the Law of the Sea (UNCLOS), which grants the right of transit passage to all vessels, including military ships, provided they do not threaten peace or security.

The Strait of Hormuz has never been fully blocked or closed to shipping. However, it has occasionally witnessed episodes of tension, particularly during periods of strained diplomatic relations or military escalation. Incidents involving tanker seizures, naval exercises and rhetorical threats from multiple actors have contributed to its reputation as a flashpoint. Its continued openness can be attributed to both geographical and legal factors.

The strait falls under the framework of transit passage rights established by the United Nations Convention on the Law of the Sea (UNCLOS), which restricts unilateral actions by coastal states to impede navigation. Moreover, any actual attempt to close the strait would likely trigger a significant escalation of regional and international tensions, making the cost of such a move exceedingly high for all involved parties.

Amid escalating tensions between Iran and Israel, recent warnings from Iranian officials about the possible closure of the Strait of Hormuz have already begun to influence global oil markets. In mid-June 2025, following Israeli airstrikes on Iranian targets and subsequent rhetoric from Tehran, Brent crude prices surged by over 4%, reaching around $78 per barrel, while WTI crude followed a similar trajectory. While a full-scale closure has not occurred, forecasts suggest that even a partial disruption — such as the loss of 1.1 million barrels per day of Iranian exports — could push prices to $75-78, whereas a complete shutdown could send them soaring to $120-130 per barrel.

The world depends on this waterway, but few grasp the full magnitude of its strategic weight or the complexity of its control.

Safe to say Hormuz is small on the map, but vast in its impact.