Could conflict in the Middle East disrupt global oil supplies? That risk is back in focus after a US strike in Baghdad killed Qasem Soleimani, a top Iranian general.
Tehran has promised to retaliate, and one place is particularly vulnerable: the Strait of Hormuz, off Iran’s southern coast.
The channel, which is only 21 miles wide at its narrowest point, is the only way to move oil from the Persian Gulf to the world’s oceans. And that’s why the attack early Thursday on two ships — one carrying oil and the other transporting a cargo of chemicals — in the nearby Gulf of Oman is such a concern.
Last year, attacks on two ships — one carrying oil and the other transporting a cargo of chemicals — in the nearby Gulf of Oman caused a temporary surge in oil prices.
Analysts at the Eurasia Group said Iran’s response to the killing of Soleimani is likely to include attempts to disrupt shipping in the Persian Gulf.
“Iran will also likely resume harassment of commercial shipping in the Gulf and may launch military exercises to temporarily disrupt shipping,” the analysts said in a research note.
If the Strait were to be closed because of the threat of ongoing attacks, it would be a massive blow to the world’s economy. Oil prices, which had been falling recently, jumped 4% on news of Thursday’s attack.
The Strait of Hormuz, which links the Gulf of Oman and the Persian Gulf, “is the world’s most important choke point,” said the US Energy Information Administration.
The Strait is even narrower than its 21-mile width suggests. The shipping channels that can handle massive supertankers are only two miles wide heading in and out of the Gulf, forcing ships to pass through Iranian and Omani territorial waters.
And the amount of oil that passes through the channel is staggering, with roughly 80% of the crude it handles destined for markets in Asia. The world’s global economy could not function without that supply of oil lubricating it.
About 22.5 million barrels of oil a day passed through the Strait of Hormuz on average since the start of 2018, according to Vortexa, an energy analytics firm. That’s roughly 24% of daily global oil production, and nearly 30% of oil moving over the world’s oceans.
About 22.5 million barrels of oil a day passed through the Strait of Hormuz on average between the start of 2018 and June last year, according to energy analytics firm Vortexa.
That’s roughly 24% of daily global oil production over that period, and nearly 30% of oil moving over the world’s oceans.
To put that in context, the amount of oil passing through the Strait of Hormuz is roughly double the entire oil production of the United States – even accounting for the recent boom in US output that resulted in it becoming the world’s largest oil producer.