Strait of Hormuz closure backed by Iran's parliament; energy markets on alert
The final decision now rests with Iran's national security council amid escalating geopolitical tensions and concerns over rising energy prices. Washington has urged Beijing to use its influence to prevent the closure.
Vandana Hari, founder of energy intelligence firm Vanda Insights, told CNBC's Squawk Box Asia that the likelihood of a full closure remains 'absolutely minimalistic.' She explained, 'If Iran blocks the strait, the country risks turning its neighboring oil-producing countries into enemies and risks hostilities with them.'
Data from the U.S. Energy Information Administration revealed that Iran shipped 1.5 million barrels per day through the Strait of Hormuz in the first quarter of 2025. A closure would also hurt Iran's market in Asia, particularly China, which accounts for the majority of Iranian oil exports.
'So very, very little to be achieved, and a lot of self-inflicted harm that Iran could do,' Hari added.
Andrew Bishop, senior partner and global head of policy research at Signum Global Advisors, supported this view, saying Iran 'will not want to antagonize China.' He further noted that disrupting supplies would 'put a target' on Iran's own oil production, export infrastructure, and regime 'at a time when there is little reason to doubt U.S. and Israeli resolve in being 'trigger-happy.''
Clayton Seigle, senior fellow for Energy Security and Climate Change at the Center for Strategic and International Studies, emphasized China's stake in the matter, stating, 'China is very dependent on oil flows from the Gulf, not just Iran. Its national security interest really would value stabilization of the situation and a de-escalation enabling safe flows of oil and gas through the strait.'
According to the Joint Maritime Information Center, there are currently no indications of threats to commercial shipping in the waterway. It confirmed that 'U.S.-associated vessels have successfully transited the Strait of Hormuz without interruption, which is a positive sign for the immediate future.'
The Strait of Hormuz is the only sea route from the Persian Gulf to the open ocean, with about 20% of the world's oil transiting through it. The U.S. Energy Information Administration calls it the 'world's most important oil transit chokepoint.'
Bishop said, 'Iran's operations in and around Hormuz are unlikely to be 'all or nothing'—but instead move along a sliding scale from total disruption to none at all.' He added, 'The best strategy [for Iran] would be to rattle Hormuz oil flows just enough to hurt the U.S. via moderate upward price movement, but not enough to provoke a major U.S. response against Iran's oil production and export capacity.'
On Sunday, Patrick De Haan, head of petroleum analysis at GasBuddy, warned in a post on X that U.S. pump prices could rise to $3.35-$3.50 per gallon in the coming days, compared to a national average of $3.139 for the week of June 16.
Should Iran decide to close the strait, David Roche, strategist at Quantum Strategy, said it would likely use small boats for a partial blockade or possibly mine the waterway for a more complete closure.
In a Sunday note, S&P Global Commodity Insights stated that any closure would not only affect Iran's exports but also those of neighboring Gulf countries, including Saudi Arabia, the UAE, Kuwait, and Qatar. This could potentially remove over 17 billion barrels of oil from global markets and disrupt regional refineries due to feedstock shortages, affecting Asia, Europe, and North America.
S&P also warned that natural gas flows could be 'severely impacted,' especially Qatar's exports of about 77 million metric tons per year, which represent roughly 20% of global LNG supply. 'Alternative supply routes for Middle Eastern oil and gas are limited, with pipeline capacity insufficient to offset potential maritime disruptions through the Persian Gulf and Red Sea,' the report added.
The Commonwealth Bank of Australia highlighted the limited alternatives, noting that pipelines in Saudi Arabia and the UAE have a combined spare capacity of only 2.6 million barrels per day, compared to about 20 million barrels per day transported through the strait.
All these factors contribute to upside risks for energy prices. Goldman Sachs estimates the market is currently pricing in a geopolitical risk premium of $12 per barrel. The firm projects that if oil flows through the strait dropped by 50% for one month, then remained down by 10% for another 11 months, Brent crude prices could 'briefly jump' to around $110 per barrel.
As global eyes remain fixed on the region, experts caution that Iran's threat to close the Strait of Hormuz could inflict significant self-harm, with profound consequences for global energy markets and regional stability.
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