How Would the World Look Like if Strait of Hormuz Closed?

Alwaght- When we look at the world energy flow lanes, we can see that there are several important choke points for energy transfer around the world. But none are as important and vulnerable as the Strait of Hormuz. Iran has several times shown its capability to block this energy route, a move that would heavily disrupt the world energy markets. 

It is noteworthy that the Strait of Hormuz has never been fully blocked in modern times, even at the times of extensive regional conflicts. 

The last major flare-up in the Strait occurred during the Iran-Iraq War in the 1980s, specifically during the Tanker War. Commercial vessels were targeted and mines were laid across the Persian Gulf. Despite the violence, the Strait remained open, but only under heavy military escort and with sky-high insurance premiums. That disruption alone triggered a 60 percent spike in global crude prices at the time.

According to a report by the Center for Strategic and International Studies (CSIS), Iran has the capability to divert or seize control of oil tankers transiting the Strait of Hormuz, or to directly attack them using speedboats, drones, anti-ship missiles, or naval mines. In such a scenario, up to 18 million barrels per day of non-Iranian crude oil and refined petroleum products could be seized or temporarily halted. That would send crude prices soaring past $90 per barrel and push average US retail gasoline prices above $3 per gallon, end even higher in some regions.

The world's main LNG transfer route

At its narrowest point, the Strait of Hormuz is just 21 miles (33.7 kilometers) wide and lies within reach of Iran's territorial waters. This slender corridor is the conduit for nearly 20 percent of the world's oil supply, literally one out of every five barrels of crude passes through it. But the strait is not just about oil; it is also a critical artery for liquefied natural gas (LNG).

The numbers tell the story. Three players dominate the global LNG market, each holding about 20 percent: the US, Qatar, and Australia. Qatar ships roughly 77 million tons of LNG annually, and the vast majority of that must transit the Strait of Hormuz. It's customers are big economies like Japan, South Korea, China, India, and parts of Europe. If access through the strait were cut off, these nations would lose a significant chunk of their energy supply almost overnight.

And the key point is that the LNG is not as flexible as oil. Crude can be rerouted or pulled from strategic reserves. But LNG infrastructure is far more rigid. The ships need specialized terminals to dock, and the liquefaction process is not something you can just ramp up elsewhere. Loading and receiving facilities are typically designed for specific gas compositions, meaning switching suppliers is not as simple as signing a new contract. The LNG market is inherently fragile, and supply shocks can ripple through it fast.

A closure of the Strait of Hormuz would hit import-dependent nations hard; think soaring inflation, deepening energy insecurity, and even the prospect of fuel rationing. For countries heavily reliant on imported gas, the consequences would be unprecedented.

Global impacts

Closure of the Strait of Hormuz, which is a common Iranian threat in response to the possible future aggression by the US, disrupt the shipping lanes and insurance market. Tanker traffic through the Persian Gulf would grind to a complete halt. Marine insurers would likely suspend coverage for vessels transiting the strait or demand exorbitant war-risk premiums. Many shipping companies would simply avoid the area altogether, forcing longer routes that drive up costs not just for energy, but for consumer goods worldwide.

Countries could tap strategic petroleum and gas reserves as a stopgap if crude supplies are choked off. But here's the vulnerability: nations like Japan, South Korea, and India, which are heavily dependent on Persian Gulf energy flows, have limited reserves. A prolonged closure of the Strait would quickly cripple them.

Meanwhile, surging energy prices would spike input costs for critical sectors like transportation, chemicals, and heavy manufacturing. Global inflation would reignite, putting central banks worldwide back under pressure. The Strait of Hormuz is not just a shipping lane, it is a pressure point for the entire global economy. Closing it would send shockwaves through markets everywhere.

What would happen once the Strait of Hormuz is closed?

Then, there is the military calculus and how the US and its allies will respond. 

A report from the Center for Strategic and International Studies (CSIS) outlines one grim scenario: the US could target Iran's oil export terminals, specifically at Kharg Island, to ramp up the pressure. But that move carries massive risk. Iran would almost certainly retaliate with missile strikes on American military bases scattered across the southern Persian Gulf, including key installations in Bahrain and Qatar. And Tehran could widen the net, hitting critical infrastructure in any nation it deems complicit in the US attack, Jordan or Israel, for example.

The 2019 missile and drone strike on Saudi Arabia's Abqaiq oil facility, a devastating attack attributed to Yemen's Ansarullah resistance movement, offered a stark preview. It showed just how vulnerable Persian Gulf energy infrastructure is to precision strikes.

And then there is the naval threat. A US Navy captain aboard a warship in the Persian Gulf told the BBC his biggest fear is a coordinated Iranian assault using swarms of drones and ballistic missiles aimed at American vessels. In such a scenario, Iran could launch so many explosive drones and fast-attack torpedo boats at once that even the US Navy's close-in defense systems might be overwhelmed.

The BBC has reported that a major number of the Iranian navy personnel have concentrated their training on asymmetrical warfare and are seeking ways to circumvent the technical privileges of their main foe, namely the US Fifth Fleet, based in Bahrain as they know that sinking an American warship with the risk of capture of the surviving personnel will mark a big humiliation for the US. So, it is not a far-fetched scenario. In 2000, the billion-dollar US Navy destroyer USS Cole was crippled by an Al-Qaeda suicide attack in the port of Aden, killing 17 American sailors. And in 1987, an Iraqi jet pilot mistakenly fired two Exocet missiles at the USS Stark in the Persian Gulf, killing 37 sailors.

Therefore, striking American naval ships by Iran is a possible choice after the first choice of closure of Strait of Hormuz.