Why is the Strait of Hormuz crucial for oil?

• More than 20 million barrels per day of crude, condensate and fuels passed through the strait in the previous year, with the shipping lane only 2 miles wide in either direction at its narrowest point
• Major Gulf exporters including Saudi Arabia, Iran, UAE, Kuwait and Iraq rely on the strait for most crude exports, while Qatar sends nearly all its LNG through the waterway
• Iran has historically threatened to block the strait during conflicts, including a 2012 threat over sanctions and vessel seizures in 2023-2024, with only 2.6 million bpd of bypass capacity available through Saudi and UAE pipelines

Summary: Strait of Hormuz Critical to Global Oil Supply Amid Iran Tensions

Key Strategic Importance:

The Strait of Hormuz, a narrow waterway between Oman and Iran, handles approximately one-fifth of global oil consumption. Over 20 million barrels per day of crude, condensate, and fuels passed through the strait in the previous year, according to analytics firm Vortexa. The shipping lane is just 2 miles (3 km) wide at critical points within the 21-mile (33 km) strait.

Market Impact:

Major OPEC producers—Saudi Arabia, Iran, UAE, Kuwait, and Iraq—export most crude through this chokepoint, primarily to Asian markets. Qatar routes nearly all its liquefied natural gas (LNG) exports through the strait, making it critical for global energy supplies.

Geopolitical Risk:

Recent tensions with Iran have raised concerns about potential disruptions. Analysts warn Tehran could target tankers or attempt to close the waterway entirely in response to international pressure regarding protests and its nuclear program. Historical precedents include the 1973 Arab oil embargo, the 1980s Tanker War, and vessel attacks in 2019. Iran has previously threatened closures (2012) and seized three vessels near the strait (2023-2024).

Mitigation Efforts:

Saudi Arabia and UAE have developed alternative routes, with 2.6 million barrels per day of unused pipeline capacity available to bypass Hormuz, according to the U.S. Energy Information Administration (June). The U.S. Fifth Fleet, based in Bahrain, protects commercial shipping in the region.

Bottom Line:

Any disruption to Strait of Hormuz operations would significantly impact global oil markets, particularly affecting Asian consumers who now represent the primary buyers of Middle Eastern crude.