Strategic Closure of Strait of Hormuz Puts Pressure on U.S., Threatens Global Oil Trade Stability

Less than a week after the onset of the war in Iran, and amid escalating conflict in the region, Iran effectively closed the Strait of Hormuz to shipping tankers moving oil from the Middle East by threatening attacks against any vessel who entered the waterway.

Thus, the small body of water, which moves a large percentage of the world’s crude oil, has become one of the most discussed places in the world in recent days.

Frank Galgano, PhD, is a professor of Geography and the Environment at Villanova University. He is an expert in military and Middle East geography and has also studied global maritime shipping and access to natural resources.

Dr. Galgano says there geographic, geopolitical, military and economic factors at play, along with widespread potential consequences, as Iran holds steady on their closure of the strait and the U.S. considers how, or if, it will attempt to help escort oil ships through.

Geography and Significance of Strait of Hormuz

Situated between Iran to the north and Oman and the United Arab Emirates to the south, the Strait of Hormuz is a narrow shipping lane that connects the Persian Gulf to the Gulf of Oman and, further out, the Arabian Sea. It is one of the most vital chokepoints in the Middle East, along with the Suez Canal, Straits of Tiran, Bab al-Mandab and the Turkish Straits.

“Right now, because of oil, it is the most important,” Dr. Galgano said. “Every day, roughly 20 percent of global petrochemical use goes through Hormuz.”

The strait itself is barely over 20 nautical miles at its narrowest, but only a small portion of that is shipping lanes. Depth constraints limit shipping to two lanes, each two miles wide, with a two-mile buffer between.

“You’re essentially looking at all of that shipping constrained to six nautical miles, and the ships are relatively slow,” Dr. Galgano said. “There are usually about 14-25 tankers every 24 hours transiting the Gulf, so there is always a ship in line."

By Iran threatening military action against any oil-carrying ships in Hormuz—and by shipping companies refusing to attempt to traverse it— one-fifth of the global oil trade is essentially cut off indefinitely.

That is concerning, given that it takes very little to send global oil prices skyrocketing.

Dr. Galgano referenced the 2010-11 Somali pirate issue that caused supertankers—which cost upward of $50,000 a day to operate—to be rerouted.

“That alone caused gas prices to raise 10 cents per gallon,” he said.

In this case, the biggest impact will be felt throughout Asia, which relies more heavily on oil imports. But the U.S., despite being the second-biggest producer of crude oil last year, will still feel significant effects, since oil is traded globally.

“It takes these supertankers eight or 12 days to reach the East Coast from Hormuz,” Dr. Galgano said. “So, a few days later you might see diminished supplies, but there is a critical point where we would face a real shortage.”

Attempting to Move Ships Through Hormuz Poses Huge Danger

Unlike the Iranian-backed Houthi rebels attacks on Israeli ships and those belonging to its allies in the Red Sea last year, Iran itself has far more sophisticated weapons, along with a strong motive to do whatever it can to put pressure on the U.S. and involved allies.

In addition to drones designed for attacking ships—like the ones used by Houthis—Iran also possesses Chinese and Russian anti-ship missiles, according to the professor.

“Ships are very vulnerable,” he said, then referencing the 2000 bombing of the USS Cole by Al Qaeda operatives. “That was just two guys in a rubber boat with an explosive device, and it almost sunk the whole ship. If one is carrying oil, it becomes almost like a large fuel bomb.”

The United States has weighed the idea of sending a convoy to help escort and protect these ships. They did as much in the late 1980s in Operation Earnest Will, in which President Reagan ordered Kuwaiti supertankers—which were being fired at—to reflag under the U.S. flag so the Navy could legally escort them.

But weapons technology has changed, and while U.S. naval ships could certainly defend themselves, “supertankers are slow and it is still an incredibly dangerous operation,” Dr. Galgano said.

“The convoy would have to be lucky 100 percent of the time. Iran would only have to be lucky once to hit a ship and cause an immediate fiasco, both physically and in the media.”

Global Dependance on Shipped Goods

According to Dr. Galgano, between 75 and 90 percent of all items you handle on a day-to-day basis come from inside the hull of a ship: shocks on your car, clothes on your back, or components of your computer.

When shipment is disrupted, it can cause supply chain and cost issues.

“During the pandemic, Ford was waiting on chips for F-150s, and HP was waiting in chemicals to make ink,” Dr. Galgano said. “Even the ship that got stuck in the Suez Canal a few years ago caused $10 billion in losses per day due to the backup.”

For commodities like oil, the indefinite inability to utilize perhaps the most important shipping lanes in the world due to large scale conflict quickly raises the economic stakes to even greater levels.

“Iran absolutely knows that, and they see this as a bargaining chip,” Dr. Galgano said. “Cause economic pain to force cessation of the attacks.”