The Cradle
The comment – made a day after a US-imposed ceasefire halted direct hostilities between Iran and the occupation state – captures the precarious calm in West Asia.
Though missiles have stopped flying, Iran has yet to climb far up the escalation ladder. Many of its deterrent cards remained unplayed – chief among them, the non-military threat of closing the Strait of Hormuz. As analysts pointed out, this strategic chokepoint was never off the table. And if war resumed, it could be the first lever pulled.
A Strait away from catastrophe
The Israel–Iran direct war that erupted on 13 June – triggered by Israeli airstrikes on Iranian military sites, nuclear scientists, and force commanders – raised immediate fears of a catastrophic disruption to oil and gas supplies.
Analysts warn that any blockade of the Strait of Hormuz could drive up energy prices and trigger a global recession. And while a tentative ceasefire is now in effect, the region remains on edge, and worst-case scenarios still loom large.
Just hours after the US attacks on Iran’s uranium enrichment facilities, the Iranian parliament overwhelmingly voted to close the Strait of Hormuz—a vital artery for the world's oil and liquefied natural gas (LNG) traffic. Iran also launched a retaliatory missile attack on US military bases in Qatar, with explosions reported over Doha.
About a quarter of the world’s oil trade, or between 15-19 million barrels of oil per day, is transported through the Strait of Hormuz, which connects the Persian Gulf to the Indian Ocean. In addition, 85 million tons of LNG from Qatar and UAE had been shipped through the Hormuz last year, meeting the 20 percent of global needs.
Oil markets react, but not as expected
Surprisingly, the war’s early impact on oil and gas markets was modest. Brent crude climbed gradually to $79 per barrel – just $9 above its pre-conflict rate. US crude, however, fell sharply by 7.2 percent to $68.51 per barrel, marking one of the steepest one-day declines in recent history. Even if the sharp fall is due to Iran's symbolic response to the US strikes, the risks remain.
Dr Cyril Widdershoven, veteran West Asian energy and defense analyst, tells The Cradle that the main risks lie in price volatility and potential diesel and gasoline shortages. But he insists there were no immediate supply shortages, citing Organisation for Economic Co-operation and Development (OECD) strategic reserves and China’s recent stockpiling.
However, Chris Weafer, co-founder of Macro Advisory and former chief strategist at Sberbank-CIB, offers a stark warning:
“If the stoppage lasts for a week or more, then you could easily be looking at $150 per barrel it is very hard to predict the correct price but a significant volume of supply would be removed and with an uncertain, or even unknown, timeline – that could push the oil price anywhere over a short period.”
Also speaking to The Cradle, Dr Mamdouh G Salameh, interational oil economist and former energy economics professor at ESCP Europe Business School, London, notes that while Saudi Arabia, the UAE, and Iran possess some pipelines that bypass Hormuz – potentially reducing disrupted shipments from 20 million to 17 million barrels per day – the impact would still be severe enough to inflict significant damage on the global economy:
“If Iran does block the Strait of Hormuz, this will indeed plunge the global economy into its worst oil crisis since the Arab oil embargo in 1973."
Widdershoven adds that in the event of a full-scale war – where key sites like Abqaiq and Fujairah were destroyed – repairs could take more than five months. He asserts that such a scenario would drive oil prices well above $150 per barrel, although current market signals, according to key players, suggest no immediate danger.
Even with the ceasefire “surprise,” Widdershoven agrees with Trump in that it might just be a pause between rounds. “The overall option of closing the Hormuz is always on the mind of analysts, but mostly of politicians and speculators.”
The blockade threat is far from over
The worst-case scenario has not materialized – yet. But Salameh reminds us of what Iran has long vowed: If its crude exports are blocked through Hormuz, it will block others from exporting too.
Such a scenario, he explains, would likely follow Israeli strikes on Iran’s crude storage in Kharg Island or other key energy assets, or if the US stepped up attacks on Iran’s nuclear sites – particularly the key Fordow facility.
As both preconditions have been met, it is not surprising that the Iranian parliament has voted for the closure of the strait. Although the vote is non-binding – with final authority resting with Iran’s Supreme National Security Council – the move could be translated as an attempt to flex muscles and send a warning, as this would be one of Iran’s handful of strategic deterrents.
Salameh is convinced that in case of a continued or a new conflict with the US, “Iran will definitely disrupt shipping in the strait.”
Weafer echoes the warning. “Iran’s gambit is likely to be to escalate quickly so that countries in the Persian Gulf and in Asia, although clearly angry at Iran, would also start to press the US to de-escalate because of the damage to their respective economies.”
And Iran might not even need to sink tankers to make its point. Targeting ships alone would likely spike insurance premiums, reducing trade volumes and pushing end-user prices much higher, suggests Weafer. The risk itself is enough to damage fragile global economies.
Widdershoven, however, remains skeptical that Iran would take the plunge. “Tehran has been threatening it for decades, but never has done it or was unable to do it. It also would be pushing the Arab neighbors to a full-scale anti-Iran position, not leaving enough maneuver room for Tehran to make a real fist.” In his view, Tehran would not really want its only commercial allies, such as China and India, to be angry with them too.
Yet Salameh is not convinced those allies would stop Tehran. Neither the Gulf Cooperation Council (GCC) nor China could dissuade Iran, he argues:
“Nor would Iran care if it is isolated, since it has no other options – and also knowing that its real allies, particularly China and Russia, will never abandon it.”
The ‘proxy’ wildcard
Widdershoven cautions that Iran’s allies in the Axis of Resistance may pose an even greater threat than Tehran itself.
Although the US and Yemen’s Ansarallah-led government agreed to a ceasefire at the beginning of May, Sanaa announced it has been coordinating with Tehran, and allegedly fired several missiles on Jaffa on 13 June.
If Iran–US hostilities reignited, Weafer believes Red Sea shipping would again come under Yemeni attack. Salameh goes further, noting that if conflict resumed, Iran and Yemen could block both Hormuz and Bab al-Mandeb. “The global economic growth could easily shrink by two to three percent.”
He estimates that a two-month closure of the Strait of Hormuz could cost the global economy around $5 trillion on an annualized basis.
A Hormuz shutdown would also choke gas markets. Around a fifth of global LNG – mostly from Qatar – moves through the narrow waterway. While Dr Widdershoven contends that it would not trigger a global recession, he concedes that European energy markets would face severe shortages and soaring inflation.
Salameh warns that the EU stands to suffer the most. It will grow more dependent on US LNG, which costs two to four times more than Russian piped gas. That will further weaken an already emaciated economy.
For now, the black scenarios were averted, and the impact on energy markets was surprisingly limited. But with no lasting peace in sight, and with regional escalation having unfolded in mere days, future shocks may come faster – and hit harder.
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