DUBAI, July 12 — A military or political closure of the Strait of Hormuz would yank roughly one-fifth of the world’s daily oil consumption off the market overnight, according to the U.S. Energy Information Administration. The strait handles about 17 million barrels per day of crude oil and petroleum products, based on EIA data from 2023. That is not a small disruption.
That is a sudden, gaping hole in global supply. Historical simulations by the EIA suggest a full closure could drive crude prices above $150 per barrel.
To put that in perspective, in 2019, after a series of tanker attacks near the strait, Brent crude spiked 15% in a single day. That was a scare, not a shutdown. A real closure would be orders of magnitude worse.
The strait is not just about oil. It also carries about 80 million tonnes of liquefied natural gas annually from Qatar, the world’s largest LNG exporter.
Think of it like a single highway that handles a fifth of the world’s fuel and most of its gas shipments. If that highway closes, there is no easy detour.
Limited workarounds and strategic reserves
There are alternative routes, but their capacity is limited. The 1,200-km East-West Pipeline across Saudi Arabia can move 5 million barrels per day. The Habshan-Fujairah pipeline in the UAE has a capacity of 1.5 million barrels per day.
Together, they cover less than half of what flows through the strait. The U.S. Strategic Petroleum Reserve holds about 375 million barrels, as of 2024.
The International Energy Agency requires its member countries to hold 90 days of oil imports in reserve. Those stockpiles are designed for emergencies, but they are not infinite. A prolonged closure would drain them.
The practical upshot: even a short disruption would send prices soaring and test the limits of the world’s backup systems. A long closure would be a different beast entirely.
Insurance and the cost of risk
The closure would also affect insurance rates for tankers. In 2019, after the tanker attacks, war risk premiums soared. That is a concrete cost that gets passed down the supply chain.
Higher insurance means higher shipping costs, which means higher prices at the refinery gate. So what does this mean for an ordinary reader?
In plain terms, the Strait of Hormuz is the world’s most important energy chokepoint. A closure there would not just be a headline — it would be a direct hit on global fuel supplies, with price spikes that would ripple through every economy that depends on oil. That is most of them.
What to watch next: any escalation in the region that threatens tanker traffic. The EIA simulations and the 2019 price spike offer a preview of what could happen.
The question is whether the world’s backup pipelines and strategic reserves are enough to weather the storm.
