Iran-US tensions: What would blocking Strait of Hormuz mean for oil, LNG? 

Whenever tensions rise between Iran and the United States, one narrow waterway moves to the centre of global attention – the Strait of Hormuz.

The world’s largest warship, the nuclear-powered aircraft carrier USS Gerald R Ford, is heading to the Gulf, joining one of the largest US military build-ups in the region since the 2003 invasion of Iraq. This time, Iran is in Washington’s crosshairs.

This month, Tehran signalled how it might respond to an attack when it announced the temporary closure of sections of the Strait of Hormuz, the narrow gateway linking the Gulf to open seas.

Iranian authorities carried out live-fire military drills in the corridor, through which about 20 percent of global oil supplies are shipped.

The move marked a rare suspension of activity in parts of the strait. It served as a pointed warning about the economic consequences if Washington proceeds with its threats to strike Iran, highlighting how quickly a regional confrontation could spill into global markets.

Where is the Strait of Hormuz?

The Strait of Hormuz is the world’s most critical oil chokepoint.

The curved waterway lies between Iran to the north and Oman and the United Arab Emirates to the south. It is roughly 50km (31 miles) wide at its entrance and exit and narrows to about 33km (20 miles) at its tightest point. It forms the only maritime link between the Gulf and the Arabian Sea.

Despite its narrow width, the channel accommodates the world’s largest crude carriers. Major Middle Eastern oil and gas exporters rely on it to move supplies to international markets while importing nations depend on its uninterrupted operation.

How much oil and gas pass through the strait?

According to the US Energy Information Administration (EIA), about 20 million barrels of oil transited through the Strait of Hormuz each day in 2024. That equates to nearly $500bn in annual energy trade, underlining the waterway’s central role in the global economy.

The crude passing through the strait originates from Iran, Iraq, Kuwait, Qatar, Saudi Arabia and the UAE.

Any prolonged disruption would rattle producers and the economies that depend on their exports.

The strait also plays a critical role in the liquefied natural gas (LNG) trade. In 2024, roughly a fifth of global LNG shipments moved through the corridor with Qatar accounting for the vast majority of those volumes, according to EIA data.

Where does it all go?

The strait handles LNG flows in both directions. Kuwait and the UAE import supplies sourced outside the Gulf, including shipments from the US and West Africa.

The EIA estimated that in 2024, 84 percent of crude oil and condensate shipments transiting the strait headed to Asian markets. A similar pattern appears in the gas trade with 83 percent of LNG volumes moving through the Strait of Hormuz destined for Asia.

China, India, Japan and South Korea accounted for a combined 69 percent intake of all crude oil and condensate flows through the strait last year. Their factories, transport networks and power grids depend on uninterrupted Gulf energy.

What are Iran’s options?

Under international law, states may exercise sovereignty up to 12 nautical miles (22km) from their coastlines. At its narrowest stretch, the Strait of Hormuz and its designated shipping lanes fall entirely within the territorial waters of Iran and Oman.

That legal reality gives Tehran geographic leverage. About 3,000 vessels transit the strait each month. If Iran tried to obstruct traffic, one of the most effective tactics would involve deploying naval mines using fast attack boats and submarines.

Tehran’s fleet includes fast boats equipped with antiship missiles, alongside surface vessels, semisubmersible craft and submarines designed for asymmetric warfare.

Iran’s parliament last year approved a motion to close the Strait of Hormuz. Any final decision rests with Supreme Leader Ali Khamenei.

Regional dynamics could further complicate the situation.

In Yemen, the Houthi group, which maintains close ties with Iran, could again try to disrupt traffic through the Bab al-Mandab Strait, another vital maritime chokepoint linking the Red Sea to global trade routes. Shipping through that corridor suffered significant disruptions after Israel’s genocidal war on Gaza began in October 2023.

The Houthis, who control northwestern Yemen, including the capital, Sanaa, recently organised a mass rally under the slogan Steadfast and Ready for the Next Round, signalling readiness for a potential confrontation with domestic or foreign adversaries.

Any coordinated pressure on the Strait of Hormuz and Bab al-Mandab Strait would amplify risks for global shipping, energy markets and international trade.

Impact on global oil prices

Colby Connelly, head of Middle East content at Energy Intelligence, told Al Jazeera from the UAE that a full or partial closure of the Strait of Hormuz would have a “major impact on oil prices in the near term”, depending on how long the strait remains contested.

“There are no other major sources of supply that can make up for what comes from the Gulf, especially given the consideration that around 70 percent of OPEC+ spare production capacity sits in the Gulf,” Connelly said, referring to the group of oil-producing countries that collectively sets production volumes.

Saudi Arabia relies heavily on the strait to export its crude, shipping roughly 5.5 million barrels per day through the corridor – more than any other country in the region, according to EIA data.

Iran’s oil exports, about 90 percent of which go to China, averaged roughly 1.7 million barrels per day in the first half of 2025, according to the EIA.

“Saudi Arabia and the UAE both have limited pipeline capacity that can allow exports to continue via the Red Sea coast and Fujairah,” a UAE port on the Gulf of Oman, Connelly warned.

While some Gulf producers hold substantial volumes in overseas storage that could cushion supply shocks, Connelly noted that buffers may prove limited in the face of serious disruptions. He cautioned: “Oil prices have been highly reactive to geopolitical tensions in recent weeks, and as a result, prices could spike to well over $100 per barrel if there were to be a major disruption.”

Impact on global economy

Any disruption to energy flows through Hormuz would drive up fuel and factory costs, especially as China leans on manufacturing and exports to sustain its economic growth.

Higher energy prices would raise production expenses with companies likely passing those costs along supply chains and to consumers.

“That’s going to have severe inflationary effects for the global economy,” warned Samuel Ramani, an associate fellow at the Royal United Services Institute in the United Kingdom.

The consequences would extend beyond China. Several major Asian economies depend heavily on shipments transiting through the strait.

Almost half of India’s crude oil imports and about 60 percent of its natural gas supplies move through the Strait of Hormuz. South Korea sources roughly 60 percent of its crude via the same route while Japan relies on it for close to three-quarters of its oil imports.

“For the Gulf countries in particular, it’s going to cause a lot of disruption,” Ramani told Al Jazeera. “I was in the UAE recently, and investors in Dubai are concerned about what that would mean for the tourism and finance sector. This may cause some investment hiccups in some of the Vision 2030 projects in Saudi Arabia.”

“There’s many, many layers of concern here, not just exports and prices but also broader macroeconomic and microeconomic consequences. So we should be looking at this as a very serious adverse financial development,” Ramani added.