The intensifying conflict in the Middle East is raising new concerns about its potential impact on the oil and gas industry. Much of the focus is on whether Iran will close the Strait of Hormuz, a critical waterway for global crude oil supply.

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Iran's parliament has voted to close access to the Strait of Hormuz, a crucial waterway for global oil and liquefied natural gas shipments, pending a final decision by the country's top security officials. The strait, located between Iran and the Arabian Peninsula, sees about 20 million barrels of oil and a fifth of global liquefied natural gas pass through daily, making it a vital route for energy supplies, especially for Asian countries.

While the United States receives a relatively small portion of its oil through the strait, Asian markets such as China, India, Japan, and South Korea are heavily reliant on it. Economic experts warn that any closure could lead to increased oil prices worldwide. The area has a history of military confrontations, and experts suggest Iran could use tactics such as mining or targeting vessels to enforce a closure.

Why the Strait of Hormuz is critical for global oil supplies

While Iran's parliament voted on Sunday to close access to the Strait of Hormuz, according to Iran's state television network, Press TV, a final decision would still have to be made by Iran's top security officials. But a move to do so could have significant ramifications on the global economy. The Strait of Hormuz is located in the Persian Gulf and connects the body of water to the Arabian Sea. It's bordered by Iran to its north and the UAE and Oman to its south, with large tankers sailing through daily with around 20 millions of barrels of oil, according to U.S. Energy Information Administration report. The same analysis found that more than a quarter of all oil traveling by ocean flows through the Strait as of this year. Additionally, after a fifth of global liquefied natural gas travels through it. In 2024, the U.S. only got about 7 percent of its total crude oil from ships traveling through the Strait of Hormuz. Asian nations are at a much greater risk of losing access to oil supplies. The U.S. Energy Information Administration noted that Asian markets received 84 percent of all crude oil and 83 percent of all liquefied natural gas shipped through the Strait, with China, India, Japan and South Korea as the largest buyers. Globally, though, economic experts are concerned that closing the Strait could raise oil prices. Oil prices fluctuated throughout Monday as the market reacted to the U.S. strikes, then Iran's retaliatory strike in Qatar. So how would Iran approach shutting the Strait down? Military experts have suggested a few options, including laying mines across Iran's territorial waters going through the Strait or targeting vessels sailing in the Gulf towards the Strait. Iran has done that in the past. During the 1980s, commercial ships, even U.S. Navy ships, got caught in the crossfire during the Iran-Iraq War when both countries attacked ships traveling through it. Over the past two decades, the Strait of Hormuz has also been the site of several confrontations between the Iranian and U.S. navies.

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Why the Strait of Hormuz is critical for global oil supplies

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