Explainer: What Happens If Iran Closes The Strait Of Hormuz?

(MENAFN- Khaleej Times)

For the UAE, the strait is a vital trade artery. Around 75 per cent of its oil exports head to Asian markets, including China, India, Japan and South Korea

• PUBLISHED: Mon 2 Mar 2026, 3:41 PM

• By:
• Mazhar Farooqui

Add as a preferred
source on Google

• Share:

As military conflict involving Iran, Israel and the United States escalates, attention has shifted to the Strait of Hormuz, and the risk that Tehran could close one of the world's most critical energy corridors.

Analysts at Goldman Sachs warn that a prolonged blockade could push oil prices to $100–$150 per barrel in worst-case scenarios.

Recommended For You UAE weather: Rains expected by night in some areas; low of 20oC in Dubai

If Iran follows through, what happens next? Here is a region-by-region assessment.

What is the Strait of Hormuz, and why does it matter?

The Strait of Hormuz is a narrow, 33km waterway between Iran and Oman. It is the world's most important oil chokepoint.

According to the US Energy Information Administration (EIA), flows through the strait averaged around 20 million barrels per day in 2024 including crude, condensate and refined products equivalent to about 20 per cent of global oil consumption. It also carries roughly a quarter of global seaborne oil trade and 20–22 per cent of LNG exports, primarily from Qatar.

For the UAE, the strait is a vital trade artery. Around 75 per cent of its oil exports head to Asian markets, including China, India, Japan and South Korea.

Impact on the UAE and the Middle East

A closure would disrupt energy exports across the Gulf. The Habshan–Fujairah pipeline, with a capacity of 1.8 million barrels per day, allows a substantial share of UAE exports to bypass the strait. The country's production averaged 3.4–3.7 million barrels per day in 2025, according to industry reports and OPEC data.

In the short term, higher oil prices could boost revenues. Over time, market analysts warn that prolonged disruption would strain logistics and drive up shipping and insurance costs, particularly for Asia-bound trade. Insurance premiums have already risen amid heightened security risks, according to shipping and industry reports.

Elsewhere in the Gulf, Saudi Arabia exports around 6 million barrels per day through Hormuz but can reroute part of that volume via its East-West pipeline, which has a capacity of 5 million barrels per day. Qatar's LNG exports would face serious disruption, while Kuwait and Iraq, with limited alternatives, would be more exposed.

Analysts say broader fallout could include infrastructure strikes, refugee movements and food supply stress. The Middle East imports a significant share of its food by sea, making disruption costly beyond energy markets.

United States

The United States imports less than 5 per cent of its oil through the Strait of Hormuz, limiting direct exposure, according to the US Energy Information Administration (EIA). But oil markets are global. If Brent crude stays above $100, US gasoline prices could rise to $4–$5 per gallon, adding to inflation and squeezing household budgets, say analysts at firms like Goldman Sachs and Rystad Energy, who model such spikes in prolonged disruptions.

Europe

Europe relies on Qatar for roughly 6–10 per cent of its LNG supply in recent data from the EIA and Eurostat, though vulnerability persists amid reduced Russian pipeline gas. A blockade would tighten LNG markets at a time when the continent remains exposed after cuts in Russian supplies. Higher energy prices would hit households and heavy industry, adding to inflation and slowing growth, according to International Energy Agency (IEA).

Asia

Asia would bear the brunt. About 84 per cent of the oil passing through the strait is destined for Asian economies, according to EIA estimates for recent flows.

China gets nearly half its crude through Hormuz and would likely tap strategic reserves, market analysts note. India, heavily dependent on Gulf crude, could face supply stress and rising fuel costs. Japan and South Korea would also confront higher import bills.

If tankers are forced to reroute around Africa's Cape of Good Hope, voyages would lengthen by 10 to 15 days, adding millions of dollars in freight and insurance costs per shipment and increasing supply chain pressure, per shipping industry data cited by Reuters.

Africa

East African countries such as Kenya and Tanzania, which rely on oil shipments transiting the strait, would face higher fuel prices.

Freight costs to the region have already risen by 25 to 35 per cent due to security risks in the Red Sea and around Hormuz, according to industry reports from Reuters and Lloyd's List. A full closure would intensify shortages and increase living costs, particularly in import-dependent economies already grappling with food insecurity.

Can Iran actually block the strait?

Iran has the capability to disrupt traffic through naval mines, anti-ship missiles and electronic interference.

During the Iran-Iraq“Tanker War” of the 1980s, shipping was repeatedly targeted, though the strait was never fully closed.

In 2025, Iranian state media reported that parliament had approved a plan to close the strait, although the final decision rests with the Supreme National Security Council.

A complete and prolonged blockade remains unlikely, analysts say. Iran exports between around 1.6 million barrels per day through the strait, primarily to China, according to Kpler and Vortexa. Closure would also damage its own economy.

Global economic fallout

A sustained closure could trigger an energy shock comparable to past oil crises.

Inflation would rise. Higher shipping and insurance costs would spread across food, manufacturing and consumer goods.

Global strategic reserves, estimated at around 1.5 billion barrels, could cushion short-term shortages. Their effectiveness would depend on how quickly supplies are released and how well governments coordinate.

Energy-intensive Asian economies would be most exposed. In a prolonged disruption, global GDP could fall by 0.3 to 0.8 per cent, according to some forecasts.

Where things stand now

As of March 2, 2026, the Strait of Hormuz remains open under international law but is facing significant operational disruption.

Iran's Revolutionary Guard has warned vessels against transiting, and vessel-tracking data from MarineTraffic indicates traffic has fallen by roughly 70 per cent.

Major carriers, including Maersk, have suspended routes. More than 150 tankers are anchored outside the strait, while others are rerouting around the Cape of Good Hope.

Reports of attacks on vessels near the waterway, including two off Oman and the UAE, have pushed insurance costs higher.

Energy executives, including those at Shell, warn that prolonged disruption could affect global trade.

MENAFN03032026000049011007ID1110808976