When tensions rise in the Strait of Hormuz, history says trouble is ahead.
The strait—which forms a tiny passage from the Persian Gulf to the Gulf of Oman—is the “world’s most important oil chokepoint,” according to the U.S. Energy Information Administration (EIA).
The narrow waterway forms a crucial link between the vast oil reserves of the Gulf states and the energy-hungry markets of Asia, and there are almost no alternate throughways. It also has longstanding geopolitical significance, a familiar saber-rattling ground for Iran, the U.S., and the Gulf states at large.
On Monday, those tensions rose rapidly, as Saudi Arabia said several of its oil tankers that had passed through the strait had been sabotaged. It’s still not clear the extent of the damage, and no actor has taken responsibility.
But the accusations immediately sparked fears of an escalation between the U.S., whose Fifth Fleet in Bahrain protects commercial ships in the strait, and Iran, which borders it. Relations between the two countries are already strained due to President Donald Trump’s decision to withdraw waivers that had blunted the impact of renewed sanctions on Iran. With little information about the oil tanker attacks, the incident stoked fears of a worst-case scenario: a confrontation between the U.S. and Iran.
As recently as this April, Iranian officials threatened to close the strait as retaliation for the renewal of U.S. sanctions, an act that a congressional research paper warned last year would likely lead to outright military conflictbetween the Iran and the U.S.
The strait doesn’t necessarily threaten energy security in the U.S. Since the shale boom, the U.S. is now an exporter of oil and gas, not an importer, meaning the route is probably less important for global oil supply than it was in previous decades, says Charles Gurdon, managing director of Menas Associates in London. Even still, fears of an escalation were already stoking oil prices on Monday morning.
“This obviously ratchets up the tensions considerably,” says Gurdon. “There’s not only an economic significance, but a political and a military one.”
It may be small, but it’s significant
The Strait of Hormuz is the only sea passage from Persian Gulf to Arabian Sea. ( Peter Hermes Furian Getty Images/iStockphoto.)
The world of oil shipping is full of “chokepoints,” from the Panama Canal to the Strait of Malacca near Singapore, but the Strait of Hormuz is arguably the most significant.
The strait is just 21 miles wide, touching Iran on one side, Oman on the other, and serving as the main water transit route to the Persian Gulf states of the UAE, Kuwait, Qatar, Bahrain and Iraq. Its two shipping lanes are just two miles wide each, with another two-mile buffer zone between them. Despite its narrowness, the route is deep enough for the world’s largest oil tankers.
Between 17 million and 18 million barrels per day of crude oil pass through the strait, including 90% of Saudi Arabia’s output, according to Rystad Energy—equivalent to about 40% of the crude traded globally. Meanwhile, the passage is also a significant route for liquid natural gas (LNG) from Qatar, one of the world’s largest exporters.
For context: take the total daily oil exports of the U.S.; in April, that was about 3 million barrels per day. Multiple that by six, put it on oil tankers, and have the ships sail through a waterway equal to the distance between New York City’s Washington Square Park and the top of Central Park. And, that’s just oil—never mind gas, food, and other necessities that follow the same path.
What makes the Strait of Hormuz all the more important is the region’s lack of alternatives. Pipelines owned by the UAE and Saudi Arabia can’t carry as much oil as tankers, and while Saudi Arabia and Iran have alternate seaports, their neighbors don’t.
We’ve been here before
The strait has seen plenty of tension before: including threats of closure during the last round of U.S. sanctions; the “tanker war” between Iran and Iraq, which lasted from roughly 1984 to 1988 and saw frequent attacks on oil tankers passing through the region; and in 1988, the U.S.’s Operation Praying Mantis, which destroyed a large chunk of Iran’s navy in the region.
That means any sign of new friction in the strait has the potential to make global oil prices—and heads of state—jump.
As published on Fortune – Dhows, fishing boats and cargo ships are seen in the Strait of Hormuz at Khasab area of Oman. Reported attacks on oil tankers in the region have stoked fears of a confrontation between the U.S. and Iran. MARWAN NAAMANI AFP/Getty Images
