Iran votes to shut Strait of Hormuz
Iran is poised to shut a major oil 'choke point' in the Middle East as retaliation for US strikes on its nuclear facilities, in a move that risks triggering a fresh energy crisis and global recession.
Following Donald Trump's decision to join the Iran-Israel conflict, lawmakers in Tehran have voted to respond by cutting off vital shipping lanes through the Strait of Hormuz.
The parliament's decision is not binding, and state television said a final decision would rest with top Iranian security officials, Reuters reported.
But the strait, which lies in Iran's territorial waters, is the world's most important oil 'choke point' and acts as the gateway out of the Persian Gulf. Around one fifth of global oil supplies and a third of liquefied natural gas (LNG) pass through it.
Any attempt by Iran to close the strait to shipping traffic – potentially by threatening vessels with mines or missiles – risks causing an oil supply shock, pushing up inflation and sparking a global recession.
It could also trigger 'a significant military response' from the US and its allies, analysts warned on Sunday.
In a note to clients, Eurasia Group said: 'The US has amassed a massive military presence in the Gulf and surrounding region, and a move by Iran against the strait would almost certainly trigger a significant military response.'
At the same time, an oil crisis threatens to push up the price of petrol, which is refined from oil, in a blow to millions of drivers. The UK relies on imports for about half of its oil needs.
The price of oil settled slightly at around $77 per barrel on Friday after Mr Trump vowed to give Iran two weeks to come to the negotiating table – prompting traders to assume there would be no immediate military action.
But analysts now expect the price to surge higher on Monday as the market's 'risk barometer' goes up, with the threat of $100 per barrel or more if Tehran attempts to close the strait.
Bjarne Schieldrop, chief commodities analyst at SEB Research, said: 'Above $80 now looks very plausible. The next step from there would be actually losing oil supply to the market, through a blockade of the Strait of Hormuz or attacks on oil infrastructure inside the Persian Gulf.
'Everyone is now on edge trying to figure out: 'What on earth is Iran going to do?''
Ashley Kelty, an oil and gas analyst at Panmure Liberum, said another key question was how Iran's neighbours in the Middle East would respond.
If Tehran tries to block shipments out of the Strait of Hormuz, it will also hurt the exports of Saudi Arabia, Kuwait, Bahrain, Qatar and the United Arab Emirates.
Mr Kelty said: 'Disrupting the Strait of Hormuz is the easiest way that Iran can respond. But the bigger question is: 'How much support does the Iranian regime have across the Arab world?'
'If they mine the strait, that basically involves all of the Middle East, because there's no way that the likes of the Qataris and Saudis are just going to sit back and watch as all their exports are shut in.'
Qatar alone provides nearly one fifth of global LNG supplies.
Mr Kelty said any crisis in the strait was unlikely to trigger a protracted 1970s-style oil crisis, but rather a 'short, sharp spike in crude prices'.
He added: 'I'd say we're looking at something more akin to what we saw when Russia invaded Ukraine. If they go and mine it, we could be looking at $100 per barrel by the end of the week.'
Iran is known to possess thousands of underwater mines, ranging from old-fashioned, moored 'contact' mines that blow up when ships touch them, to more modern 'bottom mines' that wait on the seabed until they detect ships above and surge upwards.
Tehran's arsenal includes advanced rocket-propelled mines purchased from China, as well as bottom mines purchased from Russia. They can be laid using ships and submarines, with the Russian mines also deployable from the air.
In the event the strait is mined, the US Navy could launch a clearance operation using at least four Avenger-class minesweeper vessels that it has forward deployed in Bahrain. Another four American minesweepers are based in Japan.
But clearing the strait would be a painstaking and difficult task, given Iran's use of 'ship counting' and mines, which delay detonation based on how many ships pass over them, and anti-removal fuses that can complicate minesweeping efforts.
Francis Tusa, an independent defence analyst, said such an operation would also require extensive air cover, probably provided by US Air Force jets operating from friendly bases in countries such as Saudi Arabia.
Mr Tusa said: 'If they have the protection, it will be fine. They would need to put in place combat air patrols and probably frigates as well.
'The Americans have access to a lot of air bases. At times like these, the Saudis will just say: 'What do you need?''
He added that the Royal Navy also had one Sandown-class minesweeper still based in Bahrain, but it was still undergoing repairs after another ship crashed into it last year.
'Traditionally the Americans have relied on the Royal Navy as a global leader in mine countermeasures, but the UK has been retiring its mine warfare fleet,' Mr Tusa said.
'What I think is quite worrying and sad is, at the moment, in terms of America looking to Britain for help, the real issue now is what we could actually provide. It's a non-trivial question.'
According to the RAC, a litre of unleaded petrol currently costs 132.06pc on average in Britain, with the same amount of diesel costing 138.19p per litre.
On Sunday, analysts at Peel Hunt said they viewed an Iranian attempt to close the Strait of Hormuz as a 'tail risk' because of the 'far-reaching collateral damage' it would cause, particularly to China – which heavily depends on oil shipped from the Persian Gulf.
They warned: 'It risks an all-out war with the most powerful country in the world, the US, and badly antagonising the second most powerful, China.'
In a separate note to clients, Eurasia Group analysts said they did not expect Iran to fully close the strait while its own oil exports continued, but instead to increase 'harassment of tanker traffic'.
Ships passing through the Strait of Hormuz have already experienced disruption in the past week as a result of GPS jamming in the area by Iran.
Some 23pc of vessels in the area reported experiencing jamming on Sunday, or 1,600 out of around 7,000, according to maritime data provider Windward. That represented an increase of more than 60pc compared to Friday.
Ami Daniel, Windward's chief executive, said the disruption was pushing up shipping and insurance rates, while shipping companies were also transiting the strait more slowly and cautiously - or cancelling voyages altogether.
He added: 'We're going to see a slowdown in exports from the gulf, at the very least.'
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