What would blocking the Strait of Hormuz mean for global oil and LNG shipments?
Tehran temporarily and partially closed the strategic waterway during a military drill, prompting speculation over an extended blockade
Iran partially and temporarily closed the strategic Strait of Hormuz during a military drill on Tuesday, thrusting the vital shipping route under the global spotlight once again.
Here, we examine the potential implications of a longer or more comprehensive blockade.
Where is the Strait of Hormuz? Why is it so critical?
The Strait of Hormuz is a narrow maritime corridor linking the Persian Gulf with the Indian Ocean, with Iran to the north and the United Arab Emirates and Oman to the south. It is the gulf’s only direct outlet to open seas, making it a crucial artery for global trade.
An average of around 13 million barrels of crude oil passed through the strait each day last year – roughly 31 per cent of global seaborne crude flows – according to data from market intelligence firm Kpler.
The waterway is also a key route for liquefied natural gas (LNG), with about 20 per cent of global LNG shipments passing through it, mostly from Qatar.
How has the global oil market reacted?
Global oil prices have climbed steadily. After surging about 4.5 per cent on Wednesday, crude extended gains on Thursday with a further rise of nearly 2 per cent, settling at a six-month high.