Israel-Iran Conflict: What Happens If Iran Shuts the Strait of Hormuz? Impact On Oil Prices, Global Trade Explained

As the Israel-Iran conflict turns into a full-blown war, all eyes are fixed on one of the world’s most critical maritime chokepoints — the Strait of Hormuz- a strategic waterway that handles a fifth of the world’s oil supply. What happens if Iran decides to close it in response to rising hostilities? Republic Business does a deep-dive analysis of the same.

Where is the straight located?

The Strait of Hormuz is a strait between the Persian Gulf and the Gulf of Oman. It provides the only sea passage from the Persian Gulf to the open ocean and is one of the world's most strategically important choke points.

Why is it critical?

Despite being just over 30 km wide, the Strait of Hormuz is the vital conduit for nearly 20% of global oil shipments. It is the primary export route for major oil producing nations such as Saudi Arabia, Iraq, the UAE, and Kuwait. Every day, tankers carrying crude oil and Liquefied Natural Gas (LNG) destined for Asia, Europe, and the US pass through its waters.

Also Read: Israel-Iran Conflict: What Is Operation Rising Lion? All You Need to Know | Republic World

What happens if Iran shuts it?

As per media reports, Iran has previously threatened to close the Strait in response to Western pressure, but never did it. However, with tensions reaching new highs, experts foresee that even partial disruption, either through military posturing, drone attacks, or mine-laying, could disrupt the global oil markets.

As per experts, a complete shutdown could cause Brent crude to spike above $150 per barrel, reigniting global inflation concerns and straining energy-dependent economies,

Impact on India and global markets

India, which relies on imports for over 80% of its crude needs, would be among the most severely affected. A surge in oil prices could further inflate the country’s import bill, devalue the rupee currency, and potentially compel the government to raise fuel prices or bear higher subsidy costs.

Is closure imminent?

Most experts believe that a full closure remains unlikely, as it would result in a sharp military response and also impact Iran’s own economy. However, even the threat of conflict in the Strait is enough to result in higher crude oil prices.