Admin I Sunday, June 22, 2025
TEHRAN – Iran has kicked off actions to escalate the Iran-Israel war to the global community to following attacks by the United States on three nuclear facilities in Iran.
In a statement few minutes ago, Commander of the Iranian Revolutionary Guards, Navy said measures have been put in place to close the Strait of Hormuz.
“Strait of Hormuz will be closed within hours”, the IRGC commander said.
The Strait of Hormuz: A Global Economic Chokepoint on the Brink
The Strait of Hormuz, a narrow waterway connecting the Persian Gulf to the open seas, is arguably the most critical chokepoint for global energy supplies. With Iran recently threatening its closure amidst escalating tensions, the world economy is bracing for potentially catastrophic repercussions.
Approximately 20% of the world’s daily oil supply, around 20 million barrels, transits through this strait. This includes significant exports from major Gulf producers like Saudi Arabia, Iraq, the UAE, Kuwait, and Qatar. Furthermore, a substantial portion of global liquefied natural gas (LNG) also relies on this route, particularly for delivery to energy-hungry markets in Asia and Europe.
Immediate and Far-Reaching Economic Impacts:
Should Iran make good on its threats to close or significantly disrupt the Strait of Hormuz, the global economy would face an immediate and severe shock:
* Oil Price Surge: Analysts widely predict that a prolonged closure could send crude oil prices soaring well past $100 per barrel, potentially even reaching $120-$150 or more. This would trigger a global energy crisis, mirroring or even exceeding the oil shocks of the 1970s.
* Inflationary Pressure: Skyrocketing energy costs would fuel inflation across all sectors, impacting household budgets, industrial production, and transportation costs worldwide. Central banks, already battling existing inflationary pressures, would face immense dilemmas regarding interest rate policies.
* Supply Chain Disruption: Beyond oil and gas, the Strait is a vital artery for general maritime trade. A blockade would cripple global supply chains, leading to delays, shortages, and increased shipping costs as vessels are forced to reroute around Africa, adding significant time and expense. Insurance premiums for shipping through the region are already climbing, reflecting heightened risk.
* Global GDP Reduction: Economists warn that a sustained disruption could slash global GDP by 1-2%, raising the significant risk of a worldwide recession. Vulnerable economies, particularly those heavily reliant on energy imports like India, Japan, South Korea, and China, would be hit hardest.
* LNG Market Tightness: Qatar, a major global LNG exporter, has no alternative passage for its shipments, making the global LNG market extremely tight and pushing European gas prices significantly higher.
Limited Alternatives and Strategic Importance:
While some alternative pipelines exist for oil exports from Saudi Arabia and the UAE, their capacity is limited and insufficient to fully offset the volumes that pass through the Strait of Hormuz. This underscores the strait’s unparalleled strategic importance.
A High-Stakes Scenario:
While a complete and prolonged closure of the Strait of Hormuz remains a high-risk, low-probability scenario due to the immense international pressure and potential military retaliation it would provoke, even partial disruptions or the ongoing threat of closure have tangible economic consequences.
The world is watching closely, understanding that the stability of this narrow waterway is inextricably linked to the health of the global economy.
