Tehran appears set to take steps to close the vital shipping lane, but it remains to be seen whether it can do it, and what impact this will have

WHAT: After many years of speculation, Iran is threatening to shut down one of the world’s most important maritime transport routes.

WHY: The threat comes in the wake of US strikes on Iranian nuclear facilities, which the US claims were pre-emptive to prevent Iran from acquiring nuclear weapon capabilities.

WHAT NEXT: Commodity prices are likely to become increasingly volatile, with traders keeping a keen eye on any tangible efforts to close Hormuz.

 

Global energy markets are on high alert after Iran’s parliament backed a proposal to close the Strait of Hormuz, the world’s most critical maritime chokepoint for oil, following devastating American air strikes against the country’s nuclear facilities.

The move, which threatens to sever a waterway carrying 20% of the world’s crude consumption, represents a dramatic escalation in a conflict that has thrust the Middle East into a new and perilous chapter. While the final decision rests with Iran’s Supreme National Security Council, the parliamentary consensus signals Tehran’s readiness to leverage its strategic position in response to “American aggression”.

 

Mulling the move

According to Iran’s state-affiliated Press TV, senior lawmaker Esmaeil Kowsari confirmed the Majlis, or Parliament, had reached an agreement to pursue the closure. “The parliament has come to the conclusion that it should close the Hormuz Strait, but the final decision lies with the Supreme National Security Council,” stated Kowsari, a member of the influential committee on national security and foreign policy.

The Strait of Hormuz, a narrow channel linking the Persian Gulf to the open ocean, is the sole maritime outlet for some of the world’s largest oil producers, including Saudi Arabia, the UAE, Kuwait, Iraq and Iran itself. Its closure would have immediate and severe repercussions for the global economy.

Around 18-19mn barrels per day (bpd) of crude oil and condensates pass through the strait each day. It is also a vital corridor for LNG, with Qatar, a top global exporter, heavily reliant on the route. Experts have long cautioned that any prolonged disruption would trigger a precipitous surge in global energy prices and jeopardise international energy security.

Warnings of such a scenario had intensified in the days preceding the US attack. Strategic experts, speaking to Press TV last week, had posited that direct American military intervention would prove exceptionally costly for the administration of President Donald Trump, particularly if it provoked the closure of Hormuz. They forecast that many multinational corporations would face operational shutdowns within days as essential energy supplies dwindled. Some projections suggest oil prices could leap by as much as 80% within the first week of a blockade, as the few available alternative routes would incur prohibitive costs.

It is important to note that any such move requires approval from the Supreme National Security Council before it could be implemented.

 

US strikes

The crisis has been compounded by parallel developments concerning Iran’s nuclear programme. US officials said its overnight strikes had “obliterated” Iran’s primary nuclear sites, employing a formidable arsenal that included 14 specialised bunker-buster bombs, more than two dozen Tomahawk cruise missiles and over 125 military aircraft.

In the aftermath, Israeli Prime Minister Benjamin Netanyahu revealed that Israel possessed “interesting intel” regarding the location of Iran’s stockpile of uranium enriched to 60% purity. This level is a short technical step from the 90% enrichment required for a nuclear weapon. The UN’s nuclear watchdog, the International Atomic Energy Agency (IAEA), has stated externally that Iran holds approximately 400kg of this material.

A “senior Iranian source” told the Reuters news agency on Sunday (June 22) that the majority of the highly enriched uranium at the Fordo nuclear plant had been relocated before the US attack. When questioned by Reuters about its current whereabouts, Netanyahu was guarded. “We’ve been following that very closely,” he said. “I can tell you that it’s an important component of a nuclear programme. It’s not the sole component. It’s not a sufficient component. But it is an important component and we have interesting intel on that, which you will excuse me if I don’t share with you.”

 

Urging restraint

As Tehran vowed to defend itself, Washington began its diplomatic response. US Secretary of State Marco Rubio, speaking to Fox News, urged China to exert its influence over Iran to prevent a blockade.

“I encourage the Chinese government in Beijing to call them about that, because they heavily depend on the Straits of Hormuz for their oil,” said Rubio, who also holds the post of national security adviser. He depicted the potential closure as an act of “economic suicide” for Tehran that would harm other countries more than the US. “If they do that, it will be another terrible mistake,” he added.

Rubio described the threat as a “massive escalation that would merit a response from the US and others”. The Chinese embassy in Washington did not immediately provide a comment. Despite the bellicose rhetoric, Rubio also stated that the US is prepared to enter into discussions with Iran, while simultaneously issuing a stark warning against any retaliation, which he said would be “the worst mistake they’ve ever made.”

While the threat to the strait looms large, Iran’s own ability to export oil is also a consideration. The country’s oil logistics are heavily concentrated at the Kharg Island terminal in the Persian Gulf, which accounts for about 90% of its outbound crude flows. Other, smaller terminals are located at Assaluyeh and Mahshahr in the Gulf, Jask on the Sea of Oman and Neka Port on the Caspian Sea.

In a bid to mitigate its own vulnerability to a Hormuz blockade, Tehran has developed a strategic alternative with its Jask Oil Terminal, situated outside the strait. Commissioned in 2021, the terminal is connected by the 1,000-km Goreh-Jask pipeline. However, its operational capacity remains limited. While engineered to handle 1mn bpd, analysts believe its current throughput is restricted to around 350,000 bpd.

Iran, a member of the OPEC producer group, currently produces approximately 3.3mn bpd and exports more than 2mn bpd. As markets digest the heightened risk, analysts note that the collective spare production capacity of the OPEC+ group is roughly equivalent to Iran’s total output. This provides a potential, if as yet untested, buffer that could be deployed to offset a complete loss of Iranian supply, a factor that will be central to calming market volatility in the days ahead.