With escalating tensions between Iran and Israel, especially after the US bombed nuclear facilities in Iran, there are rising fears of the Strait of Hormuz being closed. The Strait of Hormuz is a crucial maritime passage handling 20% of global oil and gas transportation.
According to state-run media, Iran’s Parliament has approved the closure of Strait of Hormuz and the final decision will be taken by Iran’s Supreme National Security Council.
Why is the Strait of Hormuz important?
The Strait of Hormuz serves as a crucial maritime connection between the Persian Gulf and the Arabian Sea, extending into the Indian Ocean. This vital waterway, with its narrowest section at just 21 miles (33 kilometers), has Iran to the north and the Arabian Peninsula to the south. The Strait of Hormuz holds immense strategic and economic significance, particularly as a mandatory route for oil vessels departing from Persian Gulf ports. This maritime passage facilitates the transportation of one-fifth of global oil and gas supplies. Statistics from the US Energy Information Administration (EIA) indicate that in 2024, the daily transport volume reached 20.3 million barrels of oil and 290 million cubic metres of LNG.
The major oil-producing nations of the region – Saudi Arabia, Iraq, UAE, Qatar, Iran, and Kuwait – rely on this passage for their exports.
Whilst historical concerns about disruptions to Persian Gulf energy flows majorly affected Western nations, particularly the US and Europe, in today’s situation the implications would most significantly impact China and Asian countries.
Based on EIA data quoted by PTI, Asian nations received 8% of crude oil and condensate shipments through the Strait of Hormuz in 2022. India, China, Japan, and South Korea collectively made up 67% of total flows during 2022 and the first six months of 2023.
India’s reliance on crude oil imports is at approximately 90%, with Middle Eastern nations, whose exports pass through the Strait of Hormuz, supplying more than 40% of these imports.
EIA reports indicate that during the first quarter of 2025, China’s crude imports via the Strait of Hormuz reached 5.4 million bpd. India received 2.1 million bpd, whilst South Korea and Japan imported 1.7 million bpd and 1.6 million bpd respectively.
The IEA has emphasised that any interference with the flow through the Strait would significantly impact global oil markets.
How will the closure of Strait of Hormuz impact India?
India imports 5.5 million barrels per day (bpd) of crude oil, with 2 million bpd passing through this strategic waterway. However, experts suggest that India’s position remains secure due to its diversified import strategy, with alternative suppliers including Russia, the United States and Brazil available to maintain supply continuity.
The Russian oil supply remains unaffected by Hormuz-related disruptions, as it uses alternative routes including the Suez Canal, Cape of Good Hope, or Pacific Ocean pathways.
Similarly, supplies from the US, West Africa, and Latin America, though more expensive, serve as viable alternatives
Regarding gas supplies, India’s primary supplier Qatar delivers without using the Strait of Hormuz for Indian shipments. Additional LNG sources from Australia, Russia and the US remain accessible regardless of any Strait of Hormuz closure.
However, analysts predict that increasing tensions in this significant energy supply region could cause short-term price fluctuations, potentially pushing oil prices towards $80 per barrel.
India relies on imports for 90% of its crude oil requirements and sources approximately half of its natural gas from international markets. The imported crude oil undergoes refining to produce petrol and diesel, while natural gas serves multiple purposes including power generation, fertiliser production, CNG for vehicles, and domestic cooking gas supply.
India obtains approximately 40% of its oil requirements from Middle Eastern countries including Iraq, Saudi Arabia, the United Arab Emirates, and Kuwait, with shipments travelling through the Strait of Hormuz.
Russia has become a significant oil supplier to India, with current imports exceeding the total imports from Middle Eastern nations. According to preliminary trade data from Kpler, Indian refineries imported 2-2.2 million bpd of Russian crude oil in June, surpassing the combined imports of about 2 million bpd from Iraq, Saudi Arabia, the UAE and Kuwait, marking the highest level in two years. Additionally, imports from the United States increased to 439,000 bpd in June, showing substantial growth from 280,000 bpd in the previous month.
Although current supplies remain stable, vessel movements indicate a reduction in crude loadings from the Middle East in the forthcoming period. Vessel operators are showing reluctance to dispatch empty tankers (ballasters) to the Gulf, with numbers decreasing from 69 to 40, whilst MEG-bound signals from the Gulf of Oman have reduced by half.
Will oil prices rise?
Global oil prices saw a sharp increase after Israel launched attacks targeting Iranian military commanders, homes, military installations and nuclear facilities on June 13. Iran retaliated by firing numerous ballistic missiles. This heightened tension caused oil prices to rise substantially, as concerns grew about geopolitical instability and potential supply chain disruptions.
The benchmark Brent crude oil has reached $77 per barrel, marking a 10 per cent increase since the onset of hostilities.
According to oil market specialists at Goldman Sachs, prices could potentially rise beyond $90 should the situation deteriorate further. Citigroup analysts project that Brent crude values might approach $90 per barrel in the event of a closure of the Strait of Hormuz.
Global security analysts deem an extended blockage of the Strait of Hormuz unlikely, given the US naval forces in the region. Any such action by Iran would not only impact the oil exports of Saudi Arabia, the UAE, Kuwait and Qatar but would also hamper its own export capabilities.
Despite aggressive rhetoric from Iranian conservatives and state media predictions of oil prices reaching $400 per barrel, the international trade analysis organisation Kpler suggests the probability of a complete blockade remains minimal, citing significant deterrents for Iran.
Such an action would severely affect China, Iran’s primary oil buyer, which sources 47 per cent of its maritime crude imports from the Middle East Gulf region. As the world’s second-largest economy, China stands as the principal purchaser of Iranian oil, reportedly consuming more than three-quarters of Iran’s oil exports.
The fact that Iran relies heavily on the Strait of Hormuz for its oil shipments through Kharg Island, which manages 96% of its exports, makes any self-imposed blockade counterproductive to its interests.
