Against the backdrop of the Persian Gulf’s shimmering strategic waterways, the Strait of Hormuz once again occupies the thoughts of energy markets and foreign ministries alike. Iran’s periodic threats to close the chokepoint — through which about 20% of global oil passes — have reintroduced a sharp geopolitical risk premium into crude oil prices. The mechanism is well understood: when supply from the Persian Gulf is threatened, oil futures spike, sending ripples through economies far beyond the region.
The Strait of Hormuz Factor
The strait’s vulnerability has been a recurring theme in international conflict for decades. The current administration in Washington, under President Donald Trump, is no stranger to the volatility that Tehran can generate. After the 2020 killing of Iranian General Qassem Soleimani by American forces, Brent crude briefly jumped to $70 per barrel — a vivid illustration of how quickly a single event can rattle markets.
Against this backdrop, every rumour of a blockade or new naval deployment is scrutinised in the corridors of trading floors and chancelleries alike. What is at stake is not merely the price of a barrel of crude but the stability of the global gasoline supply chain.
The United States Energy Information Administration notes that crude oil accounts for about 55% of the retail price of gasoline, with the remainder comprising refining, distribution, marketing, and taxes. For European consumers already wary of energy costs, any sustained disruption in the Strait would mean higher prices at the forecourt, particularly layered on top of existing pressures from the war in Ukraine and post-pandemic demand recovery.
The Strategic Reserve as a Buffer
The United States maintains a Strategic Petroleum Reserve of about 700 million barrels, established after the 1973 oil crisis, designed to be released in times of acute supply disruption. Whether this buffer alone could stabilise markets in the event of a real Hormuz closure is a question that hangs over planning discussions in Washington and allied capitals.
The wider picture, however, includes the legacy of the 2022 price shock, when regular gasoline in the United States reached a peak of $4.20 per gallon — driven by the combination of surging post-pandemic demand and Russia’s invasion of Ukraine, all layered on top of the existing Iran tensions. That peak is now a reference point for analysts assessing the potential impact of a new crisis.
In the corridors of European capitals, the focus is on diplomatic efforts to de-escalate, given the continent’s heavy reliance on oil transit through the Strait. For now, the market watches for any concrete move from Tehran, conscious that even a brief closure would test the resilience of global energy infrastructure and the willingness of governments to tap their strategic reserves.
