LONDON, July 11 — The Strait of Hormuz, a narrow waterway that sees the passage of a staggering share of the world’s oil, is once again drawing the attention of energy analysts. The question of what happens if that chokepoint closes is not a theoretical one; the economic mechanisms at play are well understood, and the numbers are sobering. The strait handled about 17 million barrels of oil per day in 2023, according to the Energy Information Administration.
To put that in context, global oil consumption that year averaged roughly 100 million barrels per day. So the strait alone accounts for about 17 percent of the world’s daily demand.
A full closure would be a shock to a system that has little slack.
What researchers found about price spikes
The EIA has modelled what a full closure could do to prices. In the short term, the agency estimates a spike of 30 to 50 percent. The Brent crude benchmark averaged $82 per barrel in 2023.
A 50-percent jump would push prices well above $120 per barrel. That is not guesswork; it is based on the physics of supply and demand when a major artery is cut.
There is recent precedent for how markets react to disruptions in the strait. In 2019, a series of tanker attacks in the region caused Brent prices to briefly rise by 15 percent. That was a temporary, limited event.
A full closure would be orders of magnitude more severe.
Who would feel the squeeze
The largest oil importers are the most exposed. China imported about 12 million barrels per day in 2023, making it the world’s biggest buyer. India imported roughly 5 million barrels per day.
The United States, which imported about 3 million barrels per day from the region that same year, would also be hit, though it has more domestic production to fall back on. What tools do governments have to cushion the blow?
The U.S. Strategic Petroleum Reserve held about 375 million barrels as of 2024. That reserve could be tapped to keep refineries running and prevent the worst of the price spikes. But reserves are a bridge, not a permanent solution.
They can buy time, not replace the daily flow of 17 million barrels. The mechanism is simple: less supply, higher prices.
The consequences are anything but simple. A sustained price surge would ripple through fuel costs, industrial inputs, and consumer goods. The Strait of Hormuz is a small piece of geography with an outsized grip on the global economy.
What happens there does not stay there.
Sources
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