By Cassia Paz Published On: June 25, 2025Categories: Daily Market News & Insights, What Is It Wednesday
When people in the energy world talk about chokepoints, the Strait of Hormuz is usually at the top of the list for a good reason. Tucked between Iran and Oman, this narrow waterway, just 21 miles wide at its tightest, connects the Persian Gulf to the Gulf of Oman and the Arabian Sea. It may not look like much on a map, but it carries more than 20 million barrels of oil every single day. That’s about a quarter of all global maritime oil trade.
It’s not just crude oil, either. Around one-fifth of the world’s liquefied natural gas (LNG) also moves through the strait, most of it coming from Qatar. In a world where energy flows dictate prices and power, the Strait of Hormuz plays a central role.
Most of this oil is heading east. Countries like China, India, Japan, and South Korea depend heavily on these shipments, and in 2024, they received nearly 70% of the oil moving through the strait. The U.S., by contrast, isn’t as directly exposed – only about 7% of its crude oil imports and 2% of its total petroleum liquids come through Hormuz, thanks to rising domestic production and Canadian imports. Still, what happens in Hormuz affects everyone. Prices respond to global supply conditions, not just local ones.
Now here’s where things get tricky. The Strait of Hormuz is a geopolitical flashpoint. Iran controls the northern side, and it has repeatedly threatened to block or disrupt traffic in response to regional tensions or sanctions. Just recently, after U.S. strikes on Iranian nuclear sites, the fear of Iranian retaliation pushed Brent crude oil prices up by $5 per barrel in a single day.
While Saudi Arabia and the UAE have pipelines that can bypass the strait, their combined spare capacity – around 2.6 million barrels per day – is nowhere near enough to cover the 20 million barrels that usually pass through. Iran has a bypass pipeline too, but it hasn’t been fully utilized since 2021.
This lack of alternatives is exactly what makes Hormuz so critical and vulnerable. If something were to shut down that passage, even temporarily, it wouldn’t just be a regional issue. It would shake global energy markets, disrupt supply chains, and send fuel prices soaring. Insurance rates for tankers would spike, shipping routes would be rerouted, and the ripple effects would be felt from refineries in Asia to gas stations in the U.S.
Past Disruptions and Shifting Flows
Between 2022 and 2024, crude and condensate volumes flowing through Hormuz declined by 1.6 million b/d, mainly due to OPEC+ production cuts. While this eased congestion slightly, it also made market flows more sensitive to any further disruptions. During periods of regional instability, such as attacks on Red Sea shipping lanes in late 2023, Saudi Arabia shifted oil flows from the Strait to overland pipelines to the Red Sea. However, this strategy also has limits and depends on spare pipeline capacity and refinery demand shifts.
The Bottom Line
The Strait of Hormuz is a global energy artery. Its uninterrupted operation underpins the stability of global oil and gas markets. While alternatives like pipelines offer limited flexibility, the vast majority of oil from the Persian Gulf still relies on this narrow route. In times of tension, the Strait becomes a geopolitical pressure point, capable of moving markets and reshaping supply chains.
With on-going conflict between Iran and Western nations, the global energy industry remains on high alert. Even a brief disruption could trigger cascading effects across supply chains, energy prices, and economic growth worldwide.
This article is part of Daily Market News & Insights
Tagged: crude oil transit, Energy Markets, fuel supply risks, global energy security, Gulf oil shipping, Iran oil exports, maritime oil trade, Middle East tensions, oil chokepoint, oil market disruption, oil prices, oil transportation routes, pipeline alternatives, Straight of Hormuz