Oil Over Troubled Strait Waters

Iran’s threats to close the Strait of Hormuz could roil oil markets, test maritime law and rattle fragile geopolitical alignments from Delhi to Washington.

Whenever sabres rattle with Iran in the Persian Gulf, the world takes notice, and rightly so. Following the recent U.S. strikes on Iranian nuclear facilities, the spectre of the Strait of Hormuz being shut down by Tehran’s leadership looms large. The 30-nautical-mile-wide bottleneck might appear a mere blue slash on the map, but its importance cannot be overstated: some 20 million barrels of oil - about a fifth of global consumption - flows through it daily.

The strategic calculus is simple. Any disruption to this artery of energy supply will send oil prices skyward and set markets trembling. That is precisely why Iran’s latest threat to block the strait, despite its illegality under international law, is no mere bluff. It is a form of geopolitical leverage that Tehran has refined over decades.

Iran straddles the northern bank of the strait, with Oman and the United Arab Emirates on the south. Oil from Saudi Arabia, Kuwait, Iraq, Qatar, and the UAE passes through these waters, alongside Iran’s own exports. Roughly 120 ships, many of them tankers, navigate this corridor daily. Compared to the Suez Canal, where half as many ships carry 12 percent of global trade, the Strait of Hormuz moves far greater quantities of fuel and is more vulnerable to disruption.

Legally, Iran cannot close the strait. The UN Convention on the Law of the Sea (UNCLOS) ensures freedom of navigation through such international straits, even if they pass through territorial waters. But legality is not the issue; enforceability is. Iran has demonstrated its capacity to seize tankers, mine waters and harass foreign vessels. It cannot fully blockade the strait without drawing a massive international military response. But short of that, Tehran can sow enough chaos to spook insurers, raise freight rates and deter ships from passing.

There is a catch. Iran, too, relies on the strait to export its oil and gas. Any full-blown closure would strangle its own economy and likely alienate its Gulf neighbours, some of whom (Qatar in particular) are keen to de-escalate the current conflict. Moreover, Tehran’s influence over the strait is partial: the western half of the passage falls within Omani waters. Yet in the fog of conflict, all that matters is perception - and oil markets are notoriously skittish.

India has particular reason to worry. Roughly 45–50 percent of its oil is imported, and half of that comes from Gulf nations. Should Hormuz be blocked, imports from Iraq (landlocked within the Gulf) would grind to a halt. While Saudi Arabia, Oman and the UAE have alternative ports on the Red Sea or outside the Gulf, Iraq does not. India would need to quickly pivot to other suppliers, renegotiate routes and absorb the cost of rising crude which is already hovering around $80 per barrel, with forecasts predicting a surge to $120 if the strait is compromised.

Such scenarios are not new. During the eight-year Iran-Iraq war in the 1980s, the strait was a conflict zone. India maintained neutrality, but neutrality does not shield tankers from missiles. Indian ships painted “INDIA” in bold letters across decks and hulls, a hopeful plea to aerial combatants. During daylight, it sometimes worked. At night, it did not. Indian seafarers were routinely placed at risk; vessels were struck and some lives lost.

Wartime protocols became the norm: ships blacked out lights, disabled radars to avoid detection and posted extra lookouts. Navigation lights, compulsory under international law, were switched off. These were necessary risks, weighed against an uninterrupted energy supply. Tanker crews, particularly those under India’s state-run Shipping Corporation, were incentivized with high war-zone wages. Less scrupulous shipping firms turned to ‘suicide squads’ - crews hired specifically to man substandard ships headed to the Gulf’s most dangerous corners.

American warships, too, have found Hormuz treacherous. In January 2007, a U.S. nuclear submarine collided with a Japanese tanker. In March 2009, another submarine rammed a U.S. warship, spilling tens of thousands of gallons of fuel. In 1988, the USS Vincennes mistakenly downed a civilian Iranian airliner, killing 290 people. Even in peacetime, Hormuz is an arena of brinkmanship.

The historical stakes are older still. The Portuguese seized control of the strait in the 16th century, wresting it from the Ottomans. The British followed, before the Persians reclaimed it. Today’s disputes are framed in the language of energy security and international law, but the deeper logic of imperial contest remains unchanged: control Hormuz, and you control the Gulf.

Yet for all its volatility, maritime order has not entirely collapsed. A traffic separation scheme, adopted in 1975, continues to regulate ship movement with surprising efficiency. Mariners tend to follow rules even when governments do not. That adherence to protocol has kept the flow of tankers steady so far.

Still, the underlying fragility persists. In an age of drones, cyberwarfare, and asymmetric conflict, a single miscalculation could trigger regional escalation. For countries like India and China, which together import nearly half of the oil that passes through Hormuz, the lesson is clear. Energy diversification, alternative transit routes and strategic petroleum reserves are imperatives. And for the world, the current crisis is a reminder that globalisation remains hostage to geography. As long as the oil keeps flowing through this narrow channel, the fate of the world economy will depend on what happens at the mouth of the Gulf.

(The writer, a former merchant navy sailor, is currently a shipping and marine consultant and member, Singapore Shipping Association.)