Iran has threatened to close the Strait of Hormuz, in what would serve as another act of retaliation after the U.S. launched strikes on three key Iranian nuclear facilities over the weekend.
Iran controls the Northern side of the Strait of Hormuz, a passage which sees significant global trade pass through daily. If it so wished, Iran could block vessels from journeying through, or disrupt trade by seizing and attacking shipping containers and oil or gas tankers in the area. With roughly 20 million barrels of oil passing through the Strait daily, making up about a fifth of global consumption, any interruption could be catastrophic.
Here’s what to know about the Strait of Hormuz, its grave importance, and what stands to happen if the passage is disrupted amid the ongoing Israel-Iran conflict, of which the U.S. is now an active participant.
What is the Strait of Hormuz?
The Strait is narrow, stretching roughly 31 miles at its widest point. Iran is on its north bank opposite Oman and the United Arab Emirates (UAE).
Most oil exports from Kuwait, Iraq, Saudi Arabia, Qatar, and the UAE pass through, as well as Iran’s own exports. Around 20% of global liquid natural gas exports also flow through the passage, mostly originating from Qatar.
The passage has long been an area of tension and geopolitical significance.
In 2019, two ships were struck, one flying a Marshall Islands flag and the other from Panama, whilst passing through. The U.S. blamed Iran for the attacks, which Tehran denied. A month prior, four other tankers—two from Saudi Arabia, the others from the UAE and Norway—were struck by suspected underwater mines, which the U.S. accused Iran of planting.
Noam Raydan, a senior fellow at the Washington Institute and an expert on energy and maritime risks, says that some countries, such as Iraq, rely on the Strait for nearly all of its energy exports, whereas other exporters have fairly reliable alternatives to fall back on, should disruption occur.
What has Iran said about closing the Strait of Hormuz?
The Iranian Parliament on Sunday voted in favour of closing the Strait of Hormuz. The decision of whether to carry out that action now lies with Iran’s Supreme National Security Council and the Supreme Leader Ayatollah Ali Khamenei.
“Just verbal threats from Iran are causing concerns in the global market. So imagine how the impact will be if they really acted on their threats,” says Raydan.
However, the maritime expert believes that a complete closure of the passage is unlikely as it would cause just as much harm to Iran themselves.
“The Strait of Hormuz is very important to Iranian allies such as China, because most of Iran’s oil goes to China. Closing the Strait would also turn relations between Iran and the GCC [Gulf Cooperation Council] countries sour,” Raydan says, adding that Iranian relations with GCC countries such as Saudi Arabia and the UAE are currently stable and also not worth risking.
“Iran can cause disruptions and keep the oil markets jittery by only carrying out individual maritime attacks,” Raydan argues, saying isolated assaults are far more likely than a closing of the entire passage.
She warns, however, that should Iranian energy infrastructure be targeted in further attacks, the Iranian response could be more severe, but “for right now, we should [instead] consider the maritime arena… there’s a track history of Iran using that to retaliate.”
Iran took part in the so-called Tanker War during the 1980s amid active conflict with Iraq, which saw oil tankers targeted by the Iranian military. The U.S. became involved and protected the tankers, in particular those flying U.S. flags, which it is bound to protect under maritime law.
Has Iran threatened to close the Strait of Hormuz before—and did it follow through on its threat?
Iran previously threatened to block the strait in 2011, when Iran’s then-Vice President Mohammad Reza Rahimi declared that oil would not pass through the waters if Western sanctions against Iran were widened. The sanctions were issued as a result of concerns over Iran’s nuclear capabilities—the very topic at the forefront of the current conflict.
In this instance, Iran did not follow through on its threat.
As TIME noted in 2011: International maritime law guarantees unimpeded transit through straits, and any deliberate military disruption can be considered an act of war.
What would be the impact on global trade if Iran closes the Strait of Hormuz?
Oil exporters and importers would stand to be vastly impacted by a closure. And the economic ripple effect would surely be felt far and wide.
According to Deutsche Bank, the cost of a barrel of oil could surge to around $120, should Iran block the passage or cause disruption to its shipping lanes. The cost of a barrel currently stands at around $75.
John Konrad, author and founder of maritime news site gCaptain, says that barriers on new tanker constructions and any disruption to production chains could have a “massive” economic and social impact.
“If you have a slowdown in natural gas, you could have a slowdown in fertilizer,” he says, adding that this could lead to “food shortages and unrest” in a worst-case scenario. The “ton mile cost” of shipping oil and natural gas will largely increase if Iran were to block trade through the Strait of Hormuz, Konrad argues, even if importers find alternative sources.
“The main thing about disruptions and shipping is the ton mile. How many miles does it take to move a ton of oil, and what is that cost?” Kondrad notes. “The United States is a lot further away from Europe, and much further away from the massive energy consumption in China and Japan and Korea than the Middle East. So what makes the Middle East [so powerful] is not only the abundance of oil, but its central location between Europe and Asia.”
European consumers would also feel the impact of any disruption in Hormuz, specifically North-West Europe, when it comes to the prices of gas, oil, and jet fuel.
“U.S. refineries might intervene and substitute any gap, but still, disruptions would be felt. Prices will be higher,” Raydan says, adding that there would also be logistical issues, similar to those felt when Houthi strikes disrupted trade in the Red Sea following the start of the Israel-Hamas war.
Read More: What Conflict in the Middle East Means for Climate Change
How have lawmakers from the U.S., U.K., China, and beyond responded?
U.S. Secretary of State Marco Rubio warned against action in the Strait of Hormuz from Iran in an interview with Fox News on Sunday.
“I would encourage the Chinese government in Beijing to call him [Khamenei] about that because they [China] heavily depend on the Strait of Hormuz for oil,” Rubio said when asked if he expected Iran to close the Strait and disrupt global oil supplies.
Rubio emphasized the U.S. viewpoint that any measures taken to disrupt supply chains in the Persian Gulf would be “another terrible mistake.”
“It’s economic suicide it they do it and we retain options to deal with that. It would be a massive escalation that would merit a response,” he warned.
China has also expressed deep concern over the escalating conflict, and the potential for disruption in trade.
“The Persian Gulf and nearby waters are [an] important route for international trade in goods and energy. Keeping the region safe and stable serves the common interests of the international community,” said Guo Jiakun, the spokesperson for China’s Ministry of Foreign Affairs, during a press conference on Monday. “China calls on the international community to step up effort to promote de-escalation of the conflict, and prevent the regional turmoil from having a greater impact on global economic growth.”
Jiakun went on to emphasize that “China stands ready to step up communication with Iran and other relevant parties to continue playing a constructive role for a de-escalation.”
U.K Foreign Minister David Lammy also spoke out on Monday, expressing concerns over the news from the Iranian parliament.
“It would be a mistake to blockade the Strait of Hormuz, I think he [Khamenei] gets that and understands that,” a hopeful Lammy told the BBC.
In agreement, Kaja Kallas, the European Union representative for foreign affairs and security policy, told reporters on Monday: “The closing of the Strait of Hormuz is something that would be extremely dangerous and not good for anybody.”
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