The escalating conflict between Israel and Iran has raised speculations of Iran blocking the Strait of Hormuz — the world’s busiest shipping route in retaliation for recent U.S bombing of its nuclear facilities at Fordo, Natanz, and Isfahan. 

The Strait of Hormuz, a narrow waterway between Iran and Oman, is the world's most vital oil transit choke point, handling approximately 20% of global oil and gas. In the first half of 2023 alone, the strategic transit corridor handled the supply of an estimated 20 million barrels per day. 

With a significant portion of global oil and gas supplied through the Strait of Hormuz to Asian and European markets, experts fear that the blocking of this critical shipping corridor could result in catastrophic consequences for the global economy, pushing up oil prices and disrupting international trade. 

A blockade would not only inflate the cost of goods and services worldwide but also significantly impact major economies like China, India, and Japan, which are top importers of crude oil from the region via the Staright.

Experts warn that closing the strait would plunge the global economy into "uncharted terrain." 

Sir Alex Younger, former head of MI6, called it an "incredible economic problem," according to a BBC report.  Bader Al-Saif, a geopolitics specialist at Kuwait University, also echoed concerns, stating that such a move would lead to a sharp uptick in oil prices and send a shockwave across stock markets.

While the strait's narrowest point lies entirely within Iranian and Omani territorial waters, allowing Iran to potentially lay mines or launch attacks on vessels, the U.S. and its allies could swiftly reopen the waterway as it did during the "tanker war" in the late 1980s.

U.S. Secretary of State Marco Rubio has labeled a potential closure as "economic suicide" for Iran and urged China, a key Iranian ally and major oil importer, to intervene. 

Analysts like Vandana Hari suggest Iran has "little to gain and too much to lose" by alienating its neighbors and its largest market in Asia and Europe. 

According to an analysis by Oxford Institute for Energy Studies, blocking the Strait could have dire consequences on global gas markets with supplies from Qatar and UAE stuck in the Middle East, resulting in short supplies and higher market prices globally. 

“Qatar and the UAE account for 20 percent of the global LNG supply, with 80 percent of their LNG exports going to Asian markets, with the balance going to Europe. A prolonged closure would lead to large falls in LNG supply to Europe, China, South Asia and Japan, Korea and Taiwan,” the institute noted.

“Europe would be disproportionately affected in volume terms, with Europe losing LNG to the Asian markets. Gas demand in Europe, China, and India, especially, would be significantly lower, with Europe and China also facing an inability to refill storage,” it added. 

Last week, Pakistan officials announced they were exploring using pipelines in Qatar and Saudi Arabia to bypass the Strait of Hormuz in the event Iran opts to close it. However, they noted no potential indicators for such scenarios in the near term.

While alternative pipelines exist for some Gulf nations, their combined capacity could only handle about 15% of the oil currently shipped through the strait, leaving the world heavily reliant on this critical chokepoint.