{"id":9629,"date":"2025-06-26T09:07:17","date_gmt":"2025-06-26T13:07:17","guid":{"rendered":"https:\/\/www.fundamentalanalytics.com\/?p=9629"},"modified":"2025-06-27T09:08:58","modified_gmt":"2025-06-27T13:08:58","slug":"what-happens-if-iran-shuts-the-strait-of-hormuz","status":"publish","type":"post","link":"https:\/\/www.fundamentalanalytics.com\/ar\/what-happens-if-iran-shuts-the-strait-of-hormuz\/","title":{"rendered":"What Happens if Iran Shuts the Strait of Hormuz?"},"content":{"rendered":"\n\n\n
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Dr. Ken Rietz<\/p>\n

The US Energy Information Administration (EIA) has identified\u00a0the Strait of Hormuz<\/a>\u00a0as a critical oil chokepoint. They also estimate that 20% of the world\u2019s exported oil passes through that strait, and the same percentage of LNG does as well. That is enough to ensure that if Iran is just potentially thinking of blocking traffic through the Strait of Hormuz, prices of crude oil and its products would rise. But it is not just theoretical. Several major news outlets (CNN, CNBC, BBC, The Indian Express) have reported that Iran\u2019s Parliament has voted to close the strait. Of course, the markets are incorporating as much information as possible into the prices of crude oil as the situations change. Here is a graph of the ICE Brent crude oil for the past few years.<\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n\n\n\n
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Figure 1: ICE Brent crude oil front-month futures prices<\/p>\n

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It is easy to trace the events of the Israel-Iran war on the graph. For example, the sudden drop in price over the past few days can be traced to the ceasefire agreement, and the associated reduction of risk, however unfounded<\/p>\n

 <\/p>\n

Iran has threatened to block the strait numerous times but has never done so. As mentioned, Tehran\u2019s parliament endorsed the move this time.\u00a0The final decision belongs to Iran\u2019s Supreme National<\/a>\u00a0Security Council<\/a>.<\/a>\u00a0A spokesman said that they have a variety of options. But also remember that Iran controls the Houthis, who have tied global shipping in knots by disrupting maritime shipping in the Red Sea, one end of the Suez Canal. So, some precedent exists.<\/p>\n

 <\/p>\n

During the 1980s, the Iran-Iraq war engaged in \u201ctanker wars\u201d during which Iraq targeted Iranian ships, and Iran targeted most everything else. The option of Iran mining the strait seems less likely, since it would also shut down Iranian tankers, which China is relying on. The Houthis are using artillery, missiles, and drones, and it is reasonable to think that is what Iran would do.<\/p>\n

 <\/p>\n

The immediate effect would bring the remaining Gulf states into the battle, since they are also heavily dependent on the strait. They have been highly critical of the Israeli attacks but now would be fighting for their own financial interests, effectively shutting down the strait. China receives 13% – 15% of its oil from Iran, and they would feel some effects. The price of crude oil would spike, and very few countries could weather that for long, given the rather shaky state of most countries\u2019 economies. An extended block of the strait could bring at least a recession as lack of oil would devastate transportation, electricity generation (since LNG would also be blocked), and most manufacturing.<\/p>\n

 <\/p>\n

Oil prices would jump, with at least a $100 per barrel price being thrown around widely. Historically, these jumps are short-lived, though. The global supply works to restore prices to more reasonable levels with remarkable efficiency. Still, given the de-escalation signals and the market\u2019s muted reaction in recent days, the prospect of a full blockade currently feels more like a bargaining chip than an imminent threat.<\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>","protected":false},"excerpt":{"rendered":"

Dr. Ken Rietz The US Energy Information Administration (EIA) has identified\u00a0the Strait of Hormuz\u00a0as a critical oil chokepoint. They also estimate that 20% of the world\u2019s exported oil passes through that strait, and the same percentage of LNG does as well. That is enough to ensure that if Iran is just potentially thinking of blocking […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"site-sidebar-layout":"default","site-content-layout":"","ast-site-content-layout":"default","site-content-style":"default","site-sidebar-style":"default","ast-global-header-display":"","ast-banner-title-visibility":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","ast-disable-related-posts":"","theme-transparent-header-meta":"default","adv-header-id-meta":"","stick-header-meta":"","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","astra-migrate-meta-layouts":"set","ast-page-background-enabled":"default","ast-page-background-meta":{"desktop":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"ast-content-background-meta":{"desktop":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"footnotes":""},"categories":[1],"tags":[],"class_list":["post-9629","post","type-post","status-publish","format-standard","hentry","category-uncategorized"],"_links":{"self":[{"href":"https:\/\/www.fundamentalanalytics.com\/ar\/wp-json\/wp\/v2\/posts\/9629","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.fundamentalanalytics.com\/ar\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.fundamentalanalytics.com\/ar\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.fundamentalanalytics.com\/ar\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.fundamentalanalytics.com\/ar\/wp-json\/wp\/v2\/comments?post=9629"}],"version-history":[{"count":1,"href":"https:\/\/www.fundamentalanalytics.com\/ar\/wp-json\/wp\/v2\/posts\/9629\/revisions"}],"predecessor-version":[{"id":9630,"href":"https:\/\/www.fundamentalanalytics.com\/ar\/wp-json\/wp\/v2\/posts\/9629\/revisions\/9630"}],"wp:attachment":[{"href":"https:\/\/www.fundamentalanalytics.com\/ar\/wp-json\/wp\/v2\/media?parent=9629"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.fundamentalanalytics.com\/ar\/wp-json\/wp\/v2\/categories?post=9629"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.fundamentalanalytics.com\/ar\/wp-json\/wp\/v2\/tags?post=9629"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}