How Iran Threat On Strait Of Hormuz Could Affect Global, Indian Oil Supplies

Amid its escalating conflict with Israel, in which the US has also now taken part by bombing three key nuclear installations, Iran has warned that it may take the unprecedented step of closing the Strait of Hormuz, the world's most critical oil corridor. 

Nearly 20% of global oil exports flow through the narrow waterway between Oman and Iran, and the closure of the Strait could put the transit of about 18 million barrels per day of oil and other fuels at risk. 

Iran has threatened to close the Strait of Hormuz several times but has never followed through because the country also relies on it to export most of its crude oil, along with other Organisation of Petroleum Export Countries (OPEC) members like Saudi Arabia, United Arab Emirates, Kuwait and Iraq. 

With the conflict on an upward trajectory, however, if Iran does carry out its threat this time, India will also suffer a hit as roughly 40% of the oil and over 50% of the liquefied natural gas (LNG) that it imports flow through this route. Qatar alone accounts for approximately 80% of India's LNG imports, with another significant chunk coming from the UAE - and both countries rely on the Strait for shipping the fuel. 

The width of the Strait is roughly 33km at its narrowest point, with the shipping lane just 3 km wide, which makes it vulnerable. Iran sees the Strait as a means of exerting pressure, and it can do so because of its location and its control of key islands like Qeshm and Hengam. 

Alternatives And Recent Events

According to a report by news agency Reuters, the UAE and Saudi Arabia have tried to find other routes to bypass the Strait. Around 2.6 million barrels per day of unused capacity from existing UAE and Saudi Arabian pipelines could be available to bypass Hormuz, the US Energy Information Administration said in June 2024

In January 2012, Iran had threatened to block the Strait in retaliation for US and European sanctions, but eventually refrained from doing so. In May 2019, four vessels, including two Saudi oil tankers, were attacked near the Strait of Hormuz, off the UAE coast.

In July 2021, an Israeli-managed oil tanker was attacked off the Oman coast, killing two crew members. Israel blamed Iran, but Tehran denied the charge, the Reuters report said. 

Three vessels, two in 2023 and one last year, were also seized by Iran near or in the Strait of Hormuz.

Over 1,000 shipping vessels have also been affected by GPS interference since the escalation between Israel and Iran began last week.

The US Fifth Fleet, based in Bahrain, is tasked with protecting commercial shipping in the area.