The Strait of Hormuz: The chokepoint that could shake the global economy

At any moment, dozens of supertankers are parked in the Persian Gulf, waiting to pass through a maritime corridor so narrow that a speedboat could cross it in less than an hour.

Yet, through that same 33-kilometre gap, crude from Saudi Arabia, Iraq, Kuwait, and the UAE flows steadily, maintaining supplies to energy markets from Tokyo to Rotterdam. 

That corridor, the Strait of Hormuz, is by most measures the most significant stretch of water in the global economy. 

And now Iran says it has closed it, with Tehran warning that any vessel attempting to pass will be attacked. 

Oil markets reacted instantly, and the reason becomes clear once the figures are presented. About one-fifth of the world’s daily oil supply passes through the strait.

There are pipelines designed to bypass it, but they carry only a fraction of that volume, and no alternative route can handle flows on the same scale.

That is what makes the strait so crucial, according to Klaus Jurgens, a political analyst and communications strategist.

“Albeit being just under 50 kilometres wide, it accounts for around 20 percent of global crude oil trade, or roughly 20 million barrels per day as of 2024,” Jurgens tells TRT World.

“One could argue that the other 80 percent still exists, but we must consider that any destination suddenly faced with a 20 percent reduction in crude oil supply will see dramatic consequences.”

“Any such reduction will lead to price increases for individual citizens, businesses and entire economies, including where oil is used for heating.”

What does closure mean?

Energy analysts have long modelled scenarios where the Strait of Hormuz is disrupted, consistently ranking such a development among the most severe supply shocks the global economy could face.

The most immediate consequence would be a sharp rise in oil prices, which would quickly ripple through airline fuel surcharges, freight costs and ultimately consumer prices across a wide range of goods. 

Economies in South and Southeast Asia, heavily reliant on imported energy, are likely to feel the impact first, although the pressure would not end there.

Manufacturing economies in Europe and Asia that depend on Gulf crude might face a different challenge: extended uncertainty that increases costs and deters investments throughout supply chains.

“This was already visible in Germany yesterday, where petrol prices at the pump in some regions surged to almost $2.20 per litre,” Jurgens says.

“Tankers using the Strait are not destined only for Europe, but to a large extent for China and India as well. The consequences will also be felt by oil producing Gulf states, as the Strait is their only maritime export route. Those shipments include LNG, with Qatar the main supplier; the country sends almost all of its LNG through the Strait.”

The result is a chain of consequences stemming from Gulf producers unable to export to motorists in Germany or manufacturing firms in Belgium, according to Jurgens, who also warned that higher inflation is the likely outcome. 

The financial aspect is equally significant. War-risk insurance premiums on commercial tankers surged almost immediately after Tehran's announcement. 

Shipping companies rarely send vessels into waters they cannot secure, meaning commercial traffic can slow down or halt even before any direct attack occurs.

That exactly represents what the Trump administration is attempting to oppose.

The President announced that the US Navy would escort commercial oil tankers through the strait if necessary, and that Washington would provide insurance guarantees to help keep Gulf shipping moving despite the heightened risk.

The move was as much a market signal as a military step: an attempt to reassure shipping companies that the corridor can remain open commercially even as tensions escalate.

“Announcing the closure of the Strait is one thing. Attacking ships passing through it is another. In fact, such attacks may not even be necessary. Insurance companies, and in turn shipping firms, may decide on their own to avoid the Strait out of fear of potential attacks, even if none actually occur,” Jurgens says.

“Insurance premiums have already risen, with many insurers refusing to cover ships intending to pass through the Strait altogether. Escorting tankers with military patrol boats will not necessarily persuade insurers to change their stance,” he adds.

The China exemption?

Some media reports have circulated suggesting that Chinese vessels might be exempt from Iran’s threats to target ships attempting to pass through the Strait of Hormuz. 

Neither Tehran nor Beijing has issued an official statement confirming such an arrangement. However, if such a scenario were to come to pass, analysts say it would have serious geopolitical repercussions. 

“There are circulating claims that only Chinese-flagged ships would be allowed through. Even if true, this needs to be put into perspective, as China’s COSCO Shipping has largely halted using the Strait. An interesting side note is that China is one of Iran’s largest oil buyers. At the same time, roughly 50 percent of China’s oil imports come from producers in the Gulf region,” Jurgens says.

“It is therefore no surprise that China is urging Iran to keep the Strait open, though so far without success,” he adds.

“At the same time, China may look to increase purchases from Russia, which would again bring US sanctions policy towards Moscow into focus. Tensions between Washington and countries that restart or expand trade with Russia are likely to increase.”

Beijing has been purchasing Iranian oil for years, discounted crude that American sanctions have locked out of Western markets. 

China remains Iran's most significant commercial partner and, in many respects, the economic support that has enabled Tehran to endure maximum-pressure campaigns. 

Allowing Chinese tankers to pass while threatening all others sends a clear message about Iran's view of allies and targets.

In that case, China would seem to gain an immediate advantage. Ongoing access to Gulf oil during a period of disruption for competitors provides both supply security and a pricing edge. 

Yet Beijing’s broader exposure remains more complex. Chinese commercial interests are deeply rooted in the global trading system, and a serious military escalation in the Gulf would entail risks that go far beyond any short-term oil benefit.

For Washington, even suggesting a selective exemption would serve as a strong geopolitical signal. The US decision to escort commercial tankers through the strait seemed, at least partly, to be a response aimed at keeping the waterway accessible to all shipping.

“Iran sees closing the Strait as a form of collective punishment on a global scale,” Jurgens says.

“Whether this will generate sympathy among other nations after the US and Israeli attacks, including the heinous attack on a girls’ school, remains to be seen.”