What are the stakes in Strait of Hormuz if Iran-Israel conflict worsens?
Tensions are flaring up in the Middle East and there are already knock-on effects impacting economies globally, including with higher prices for gasoline at the pumps.
According to a Reuters report on Wednesday, former Iranian economy minister Ehsan Khandouzi has said that tankers and LNG cargoes should only transit the Strait of Hormuz with Iranian permission and this policy should be carried out from 'tomorrow [Wednesday] for a hundred days.'
While it's not clear if Khandouzi was speaking personally or if his views are shared by the regime in Tehran, the stakes of any changes to passage through the Strait of Hormuz would be significant, experts say.
'It is an enormous, probably the biggest and most important maritime choke point in the world for the global economy,' says Joe Calnan, vice-president of energy and a fellow at the Canadian Global Affairs Institute.
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'This is the single choke point that is most likely to upend the international economy, and there's not very many alternative routes.'
Speaking at the G7 summit in Alberta, leaders said in a joint statement that they are watching the conflict closely.
'We urge that the resolution of the Iranian crisis leads to a broader de-escalation of hostilities in the Middle East, including a ceasefire in Gaza,' the statement said.
'We will remain vigilant to the implications for international energy markets and stand ready to coordinate, including with like-minded partners, to safeguard market stability.'
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What is the Strait of Hormuz?
The Strait of Hormuz is about 30 km wide at its narrowest point and acts as a channel between the Persian Gulf and the Gulf of Oman.
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Persian Gulf region showing the Strait of Hormuz, a vital shipping route, and narrow choke point on the way to the Gulf of Oman and Arabian Sea.
Although Oman, to the south, technically controls the waterway, Iran's location immediately to the north means vessels could be at risk of attacks or blockades.
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Among the many shipping vessels that pass through the strait every day carrying a wide range of goods, the majority contain crude oil, liquified natural gas, propane and many others energy products critical to economies worldwide.
According to the U.S. Energy Information Administration, which is the statistics branch of the U.S. Department of Energy, 20 million barrels of oil per day passed through the strait, or roughly 20 per cent of global consumption, in 2024.
'The inability of oil to transit a major chokepoint, even temporarily, can create substantial supply delays and raise shipping costs, potentially increasing world energy prices,' the U.S. Energy Information Administration says.
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'Although most chokepoints can be circumvented by using other routes—often adding significantly to transit time—some chokepoints have no practical alternatives. Most volumes that transit the strait have no alternative means of exiting the region, although there are some pipeline alternatives that can avoid the Strait of Hormuz.'
Takeshi Hashimoto, CEO of Japan's second-largest shipping company MOL, was quoted by Reuters while speaking on the sidelines of the Energy Asia conference and describing the strait's importance.
'There is no alternative route for shipments in the (Persian) Gulf — there is no other choice,' he said.
How did this all start?
These tensions in the region are rooted in a combination of relatively recent conflicts, including Israel's fight with Hamas in Gaza, which Iran has been involved in by arming Hamas with military resources and intelligence, while also backing Hezbollah, Houthis and other militant groups.
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Iran has also opposed terms of a nuclear deal with the United States.
More recently, Israel launched strikes on Iran's nuclear and military facilities, which led Iran to launch counterattacks. The two sides have been engaging in military strikes for almost a week since, eventually drawing the more focused watch of the United States.
If Iran were to target the Strait of Hormuz, it would rapidly escalate the situation.
'It's a difficult option for Iran to employ as it would almost certainly introduce the U.S. and others into the conflict,' says senior geopolitical adviser Arif Lalani at StrategyCorp in an email to Global News.
Lalani was formerly the Canadian ambassador to Jordan, Iraq, Afghanistan and the United Arab Emirates and was also director general of strategic policy at what is now Global Affairs Canada.
What happens if the Strait of Hormuz is shut down?
Most of the oil coming from the Persian Gulf is bound for China, Korea, Japan, and India, with smaller volumes going to the U.S. as well, the U.S. Energy Information Administration data says.
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But instability affects global oil markets, and not just individual countries.
According to the International Energy Agency, over a fifth of the world's oil passes through the Strait of Hormuz daily, and a shutdown would mean a big spike for the price of oil beyond recent increases.
In most cases, when the price of oil goes up, so too does the price of transportation, including gasoline for cars, planes, trains, boats and more.
'If we're talking about anywhere between five to 10 million barrels of oil per day being taken off the market, that could have huge impacts globally, and not something that's constrained just to the Middle East,' says Calnan.
'Energy is hugely reliant on oil for transportation, for heating, for electricity, for petrochemicals, and all sorts of things — oil is really important, and this is a major supply of it.'
Gas prices in Canada, among other countries, could spike sharply if shipments reroute away from the Strait of Hormuz for fear of attacks by Iran or its proxies. The oil that Canada consumes comes largely from domestic sources, but also international, including the Middle East.
A situation where the Strait of Hormuz sees fewer, or no shipments of exports like oil not only would be bad for Canadians filling up their gas tanks, but also have wider ripple effects across the economy.
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This also could mean a potential lost opportunity for Canadian oil exporters as shutdown of the strait would mean higher international demand for oil.
'If Canada had built the pipelines and ports off our West Coast, Canada could be supplying key allies and the threat of disrupting the Strait of Hormuz would be much less — Canada and the West would be stronger' says Lalani.
'Instead, Canada's resources are marooned on the North American continent.'
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Although experts feel it is unlikely that the Strait of Hormuz will be used for leverage at this stage of the conflict, it's important to understand the risks as Iran feels further pressure.
'They (Iran) would be kind of attacking the energy security of their own customers, and not Israel or the United States by shutting down the Strait of Hormuz. It's more of an existential threat to the global economy that Iran would be trying to use this as leverage,' says Calnan.
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'I still think it's extremely unlikely that they choose to do this, but it's currently looking like the Iranian regime might be in a situation of truly existential threat, and that can create some pretty extreme options being on the table.'
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