U.S.-Iran Tensions Threaten 20% of Global Oil Trade

Tensions between the United States and Iran have escalated, with the U.S. reportedly considering an attack on Iran. This development has raised concerns about the security of the Strait of Hormuz, a critical waterway for global oil trade. The Strait of Hormuz, located between Oman and Iran, is a key transit route for approximately 20% of the world's daily oil consumption, with around 18 million barrels passing through it daily. The narrowest point of the strait is only 33 kilometers wide, making it a strategic choke point for global energy supplies.

According to reports, the U.S. President has approved a plan to attack Iran but has not yet issued the final order. The plan is reportedly aimed at pressuring Iran to abandon its nuclear program. The potential target of the attack is the heavily fortified Fordow nuclear facility, which is buried deep within a mountain and is believed to require the most powerful bunker-busting bombs to destroy.

In response to the escalating tensions, a former Iranian economic minister issued a statement on social media, declaring that from the following day, oil tankers and liquefied natural gas vessels would require Iranian approval to pass through the Strait of Hormuz for the next 100 days. This threat targets the critical sea route through which approximately 20% of global oil trade passes. The former minister, who served in the cabinet of the late Iranian President, has close ties with the hardline faction of the Iranian establishment. The timing of this statement is significant, coming amid heightened regional tensions following an Israeli airstrike on Iran.

The Strait of Hormuz has seen frequent GPS disruptions in recent days, and on Tuesday, two oil tankers collided, causing a fire and raising environmental disaster concerns. Analysts warn that if the U.S. intervenes in the conflict, disruption to shipping through the Strait of Hormuz is almost inevitable, which could plunge the global energy market into turmoil. The Strait of Hormuz is also responsible for approximately 30% of global seaborne oil trade and 20% of liquefied natural gas supply, making any disruption to its operations a significant concern for global energy flows.

The Iranian Revolutionary Guard Corps' naval activities in the region, combined with the former minister's threat, have increased the likelihood of actions targeting the strait's commercial shipping lanes. The U.S. President held a discussion with his national security team about the Middle East situation for over an hour on Tuesday, followed by a call with the Israeli Prime Minister. The key question now is whether the U.S. will intervene in the conflict, as any intervention would almost certainly result in a disruption to shipping through the Strait of Hormuz, causing global energy markets to become volatile.