The Israeli air defense system intercepts missiles launched by Iran in Tel Aviv, Israel on June 18, 2025 local time. Photo: IC

 
New York WTI crude oil surged nearly 5 percent at one point when it opened on Monday, and benchmark Brent crude jumped almost 6 percent, following Iran's latest warning that it may block the Strait of Hormuz, a critical chokepoint for global oil transportation. 

So, how important is the Strait of Hormuz to global oil trade? Do major oil exporters in the Middle East have other alternatives? For Iran, is there any other choice besides blocking the Strait of Hormuz? An expert told the Global Times that closing that Strait would deal a major shock to the international energy market — but noted that Iran still has other options, and such a move is not its optimal solution.

How important is the Strait of Hormuz to global oil trade?

A member of parliament's national security commission Esmail Kosari was quoted by local media as saying: "For now, [parliament has] come to the conclusion we should shut down the Strait of Hormuz, but the final decision in this regard lies with the Supreme National Security Council," reported Reuters on Sunday. 

Iran's statement rattled the global crude oil market. Brent crude in London jumped 6 percent at the market opening on Monday. Although the increase narrowed later, it was still hovering above $76 a barrel at press time, the highest level since late January this year. The importance of the Strait of Hormuz in the global oil trade has once again been thrust into the spotlight.

Public data shows that the Strait of Hormuz lies between Oman and Iran, connecting the Gulf of Oman in the east and the Persian Gulf in the west. It is the only maritime route for oil exports from the Gulf to global markets and holds immense economic and strategic significance. Following Israel's recent air strikes on Iran, global concerns have grown that Iran may block this strategic waterway.

In 2024 and the first quarter of 2025, more than a quarter of global seaborne oil trade passed through the Strait of Hormuz, equaling about one-fifth of oil and petroleum consumption worldwide, cbsnews.com reported, citing the US Energy Information Administration (EIA). 

The EIA estimated that since at least 2020, around 20 million barrels of oil have passed through the strait daily. Tanker tracking data showed that nearly 40 percent of this volume in 2024 came from Saudi Arabia — the most of any country. Along with crude oil and petroleum products, the strait also carried about one-fifth of the world's liquefied natural gas trade in 2024, mainly from Qatar.

Niu Xinchun, executive director of the China-Arab Research Institute at Ningxia University, told the Global Times on Monday that an Iranian blockade of the Strait of Hormuz would deliver a major shock to the global energy market. First, international oil prices will soar; second, global supply chains would face serious disruptions.

If tensions escalate, it may also affect the security and stability of the global production and supply chain, and plunge the international economic order into turmoil, Niu added. 

Yang Yitao, an analyst at Guosheng Securities said in a report that the crude oil market was being jolted by Iran's "threat of blockade." 

During the height of the Iranian nuclear crisis in 2008, Iranian speedboats and US warships clashed at sea. At that time, markets were deeply alarmed about the risk of the Strait of Hormuz being blocked. Morgan Stanley forecast that oil prices might reach $150 per barrel. On July 3, 2008, Brent crude oil hit a high of $146 per barrel, up 49 percent from the beginning of the year. If the Israel-Iran-conflict triggers major instability inside Iran, this round of oil price fluctuations could exceed all expectations.

JP Morgan said in a note, as reported by Reuters, that a closure of the Strait of Hormuz would likely trigger a prolonged oil price shock with ripple effects across global macroeconomic fronts. 

It said that in the worst-case scenario of a wider regional conflict that includes the closure of Hormuz, it estimates oil prices could surge to $120-130 per barrel.

Can the Strait of Hormuz be bypassed?

Currently, most of Saudi Arabia and the UAE's crude oil exports pass through the Strait of Hormuz. However, Reuters reported on Monday that the two Gulf powers could bypass the strait by oil pipelines, however. Saudi Arabia, the world's top oil exporter, producing around 9 million bpd, has a crude pipeline that runs from the Abqaiq oilfield on the Gulf coast in the east to the Red Sea port city of Yanbu in the west. The pipeline has a capacity of 5 million bpd and was able to temporarily expand its capacity by another 2 million bpd in 2019.

The UAE, which produced 3.3 million barrels per day in April, has a 1.5 million bpd pipeline linking its onshore oilfields to the Fujairah oil terminal located east of the Strait of Hormuz.

However, this alternate route is vulnerable to attacks from Houthi forces in Yemen, who have repeatedly disrupted shipping through the Suez Canal in recent years. Meanwhile, Iraq, Kuwait and Qatar currently have no clear alternatives to the strait.

To reduce reliance on the Strait of Hormuz, Saudi Arabia and the United Arab Emirates have invested in pipelines that bypass the chokepoint. However, capacity limitations and ongoing geopolitical risks mean these measures cannot fully offset the impact of a potential closure, according to an article posted on Middle East Forum Observer. 

CBS News noted that if the Strait of Hormuz is blocked, Saudi and UAE pipelines can serve as alternative trade routes to some extent. However, their transport capacity remains significantly constrained.

The article added that Iran has its own bypass pipeline, the Goreh-Jask pipeline built in 2021, which enables direct oil exports to the Gulf of Oman, avoiding the Strait of Hormuz. However, operational and political challenges have limited its capacity to just 300,000 barrels, and Iran has not used the pipeline since September 2024.

"Although these Gulf countries have built oil pipelines from the Persian Gulf to the Red Sea, their transportation capacity is very limited, and there are many technical problems to be solved in switching from maritime to pipeline transport. There is no way to adjust it in a short time." Niu said. He added that in an extreme scenario where Iran cuts off the strait, oil exports from Saudi Arabia, the UAE, and Kuwait would suffer disruptions.

For the US, although direct oil imports from the Middle East are limited, the global oil price is tightly linked.  Any spike in prices would inevitably affect the US economy and further worsen its inflation outlook, Niu noted. 

Will Iran block the Strait of Hormuz?

"At present, it is unlikely that Iran will block the Strait of Hormuz, as this remains its last resort." Niu said. "As a double-edged sword, closing the strait would severely hurt Iran itself. Iran still has multiple options, and closing the strait is far from its best option."

Historically, this is not the first time Iran has threatened to close the Strait of Hormuz, but it has not been completely closed so far. Because Iran also realizes that closing the Strait does not form a precise strike against the US and Israel, but has a significantly damage on its own oil exports, Niu said.

Yang noted in the report that Iran issued similar threats in 2008, 2011-2012, and 2018-2019, but a full blockade of the strait has never been carried out.

"For Iran, rather than an immediate full blockade, there may be more gradual, segmented and targeted ways, Niu said. "At present, the Iranian parliament has agreed to close the Strait, but in Iran's decision-making system, the parliament is not a core decision-making body, so their approval is not decisive."

Iranian efforts to close the strait and target energy infrastructure in the Persian Gulf are "unlikely," Eurasia Group analysts said in a note earlier Sunday morning, according Axios. "The US has amassed a massive military presence in the Gulf and surrounding region, and a move by Iran against the strait might trigger a significant military response," they wrote.

"They could disrupt, in our view, shipping through Hormuz by a lot longer than the market thinks," said Bob McNally, founder of Rapidan Energy and former energy advisor to President George W. Bush. Shipping could be interrupted for weeks or even months, McNally said.