Strait of Hormuz Under Threat: A Global Energy Crisis Looms

Amid escalating military tensions between Israel and Iran since mid-June 2025, the Strait of Hormuz, the vital artery for global energy flows, has emerged as a geopolitical flashpoint. Approximately one-third of the world’s oil production and vast volumes of liquefied natural gas pass through this narrow strait, making it a strategic choke point. Any disruption here could ignite a global energy crisis affecting economies from Asia to Europe, exacerbating social and political unrest in industrialized nations.

Escalation Targeting Infrastructure: The South Pars Gas Field Strike

Israel’s initial strikes on Iran in June 2025 avoided oil and gas facilities, temporarily calming markets. However, the confrontation soon took a dangerous turn. The day after the initial strikes, a massive fire broke out at Phase Four of the South Pars gas field, Iran’s largest, located in Bushehr province along the Persian Gulf coast. According to Iran’s Tasnim news agency, an Israeli airstrike halted production of 12 million cubic meters of gas per day from the Phase 14 platform, impacting local and regional gas supplies.

South Pars, near the maritime border with Qatar, is the backbone of Iran’s gas industry, producing over 70% of the country’s total natural gas. Disruption, even temporary, directly affects gas exports to neighboring countries such as Iraq and Turkey, as well as domestic electricity generation. Although Iran’s Ministry of Oil later announced the fire was contained, the incident raised fears of further attacks on energy infrastructure, potentially expanding the conflict to the Strait of Hormuz.

Strait of Hormuz: The Global Choke Point

The Strait of Hormuz is the world’s most critical maritime corridor for energy trade. Daily, over 20 million barrels of oil, condensates, and fuel, about one-third of global output, pass through it, alongside a similar proportion of liquefied natural gas, especially from Qatar, the world’s largest LNG exporter. The strait lies between Iran’s northern coast and Oman to the south, linking the Persian Gulf to the Gulf of Oman and the Arabian Sea. At its narrowest, it spans just 33 kilometers, with two shipping lanes each only 3 kilometers wide, making it highly vulnerable to closure via naval mines, missiles, or military operations.

Historically, the strait has been a hotspot for regional and international tensions. During the October 1973 War, Arab states halted oil exports through the strait in support of Israel’s adversaries, triggering a global energy crisis that shook Western economies. More recently, tensions between Iran and the U.S. escalated after America’s 2018 withdrawal from the nuclear deal, accompanied by incidents involving tanker attacks and vessel seizures in the strait. This history underscores the strait’s sensitivity as a strategic pressure point.

Threatening Closure: Iran’s Strategic Card

Esmail Kosari, a member of Iran’s Parliamentary National Security Committee, hinted at the possibility of closing the Strait of Hormuz in response to Israeli strikes. This is not Iran’s first time threatening such action; it has done so during past crises involving Western sanctions or U.S. support for Israel. Iran’s geographic position, controlling the northern coast of the strait, affords it the military capability to disrupt navigation using anti-ship missiles, fast boats, or naval mines.

Even a temporary closure of the strait would have catastrophic repercussions:

• Oil prices are soaring to between $150 and $200 per barrel, depending on the duration.

• Maritime insurance costs are skyrocketing, with “war risk” premiums jumping to 2% of vessel value from 0.0001% before the escalation.

• Supply chain disruptions, particularly affecting Asia (China, India, and Japan) and Europe, which heavily rely on Gulf oil and gas.

• Strategic stockpile shortages, as industrialized nations’ reserves are insufficient to cover more than a few weeks of supply gaps.

Direct Economic Impacts

Following the Israeli strikes, global oil prices surged over 10%, with Brent crude reaching approximately $77 per barrel. Markets anticipate prices exceeding $100 if the conflict intensifies, especially with threats to close the strait. European natural gas prices rose to €40 per megawatt-hour amid fears of disrupted Qatari LNG shipments. These hikes exacerbate inflation in Western economies already burdened by rising energy costs since the Russia-Ukraine war.

OPEC+ nations, led by Saudi Arabia and Russia, have attempted to boost production to stabilize markets, but these efforts remain limited against the scale of potential disruption. A strait closure could push oil prices to $120–$150 per barrel, reviving fears of a 1970s-style global energy crisis. Such a crisis would ripple across multiple sectors, from transportation and manufacturing to agriculture and consumer goods.

In maritime shipping, insurance premiums have skyrocketed, forcing tanker operators to reroute vessels via the Cape of Good Hope, a detour adding about two weeks to Gulf-to-Asia transit times and increasing fuel costs by 30%, expenses ultimately passed to consumers. Very Large Crude Carriers (VLCCs) have also faced more than 20% shipping cost increases, slowing trade and pushing up prices for essentials like food and medicine.

Limited Alternatives to the Strait of Hormuz

Gulf states have sought to develop alternative export routes to reduce reliance on the strait:

• Saudi East-West Pipeline: Transports oil from the Eastern Province to the Red Sea port of Yanbu, with a capacity of up to 2 million barrels per day.

• 
  Habshan-Fujairah Pipeline (UAE): Exports oil from Fujairah on the Gulf of Oman coast, with a capacity near 600,000 barrels per day.

However, combined, these pipelines handle only about 2.6 million barrels daily, a fraction of the 20 million barrels shipped through the strait each day. Moreover, escalation involving Yemen’s Houthi rebels threatens the Bab al-Mandeb strait at the southern entrance to the Red Sea, risking further disruption of Gulf oil exports through the Suez Canal to Europe. This dual threat complicates Gulf strategic calculations and limits their options.

Iran’s Potential Responses: Targeting Israeli and Gulf Facilities

Should Israel persist in striking Iranian energy sites, Iran might retaliate against key Israeli facilities such as

• Haifa and Ashdod refineries, which supply most of Israel’s petroleum derivatives.

• Offshore gas platforms like Tamar, Leviathan, and Karish, major sources of natural gas.

Security sources also warn of possible attacks on Gulf oil infrastructure, such as Saudi export terminals or UAE ports, aiming to paralyze regional energy exports. Although Israel largely imports its energy from outside the Gulf, such strikes would severely damage the global economy, particularly industrialized countries like Japan, South Korea, and Europe that depend on Gulf oil.

Iran may also escalate via proxy forces, such as Hezbollah in Lebanon or Houthis in Yemen, broadening the conflict’s scope. Houthi missile attacks on vessels in the Red Sea could disrupt Bab al-Mandeb shipping, worsening global supply crises. While this strategy aims to pressure the international community to restrain Israeli actions, it risks provoking Western military intervention.

Strategic Analysis: Global Consequences

Short-term: Continued tension will maintain market uncertainty, pushing energy prices and shipping costs higher, impacting consumers in Asia and Europe with rising fuel, electricity, and commodity costs.

Medium-term: Strait closure would trigger an economic shock comparable to the 1973 oil crisis, halting navigation, disrupting supply chains, and intensifying global inflation. Developing countries would suffer most due to limited resources.

Long-term solutions require

Diversifying energy sources through investment in renewables and nuclear power to reduce Gulf oil dependence.

Expanding strategic reserves to buffer future shocks.

Developing alternative export routes by expanding pipelines and enhancing Red Sea infrastructure.

Recommendations to Avert Disaster

1. Urgent diplomatic intervention: Major powers like the U.S. and China must lead negotiations to de-escalate tensions and prevent strait closure.

2. Enhanced maritime security: Deploy international naval forces to safeguard Gulf navigation while avoiding provocations.

3. Support for energy alternatives: Accelerate renewable energy investments to reduce fossil fuel reliance.

4. Coordinated release of strategic reserves: Utilize oil stockpiles if the crisis worsens.

Conclusion

The Israel-Iran conflict is expanding beyond military confrontations to threaten the global economy through oil and gas. The Strait of Hormuz is not just a maritime passage; it is the lifeline of the world economy. Any disruption there could spark an energy crisis affecting every household, factory, and vehicle worldwide. Given current tensions, urgent diplomatic action is imperative, not optional, to prevent an economic catastrophe that could plunge the world into decades of turmoil.