On Sunday, one day after U.S. and Israeli forces started launching a barrage of missiles across Iran, an oil tanker docked off the coast of Oman caught fire. On the same day, maritime tracking organizations reported that tankers were targeted in the waters north of the Arabian Peninsula.
Experts claim that these attacks are opening up a new front in the war, which could have huge consequences. A large part of the world’s energy supply passes through these waters. For each day that attacks occur and fewer ships take the risk of navigating there, the world gets a bit closer to an economic crisis.
Oman is located at the southern end of the Strait of Hormuz, a crucial maritime traffic route that connects countries in the Persian Gulf, such as Iran, to the rest of the world. On normal days, around 20 million barrels of oil, or a certain proportion of the world’s liquid petroleum, passes through the strait, which is less than 30 miles wide at its narrowest point. In a time of regional instability, this seafaring passage can quickly turn into a strategic chokepoint, and its effects are already being felt on a global scale.
The renewed conflict in Iran and the regime’s retaliatory attacks across the Middle East have brought the strait back to the center of recession concerns. Analysts warn that even a partial or prolonged disruption of the petroleum supply could cause the world economy to contract. With the weekend’s attacks, experts are warning that triple – digit crude oil prices might be the least of the world’s worries. If the strait remains closed for a long time, it could definitely harm the global economy.
“A long – term closure of the Strait of Hormuz will surely lead to a global recession,” Bob McNally, the founder of the consultancy group Rapidan Energy and a former energy advisor to George W. Bush’s White House, said on Saturday.
It’s not just about oil. According to the Energy Information Administration, around a certain proportion of globally – traded liquefied natural gas passed through the Strait of Hormuz in 2024, making it one of the most critical nodes in the world’s energy system. Tanker – tracking data shows that Saudi Arabia alone shipped a certain amount through the strait in 2024. With about 38% of total crude oil flowing through it, the passage is essential for Gulf exporters. Although there are workarounds, including routes that criss – cross the Arabian Peninsula, their limited capacity would struggle to make up for the lost flows if the strait were fully closed, leaving the global market particularly vulnerable to any sustained disruption.
Although the Islamic Republic has not yet forcefully closed the strait, the sentiment has already had a significant impact. On Saturday, the Iranian military warned that passage through the strait was “[status],” according to local news reports affiliated with Iran’s Revolutionary Guard. By the end of the day, ship traffic through the strait was [comparison] compared to the previous day, the New York Times reported.
Global fallout
A long – term halt in shipments would shock the global economy. Last summer, after a brief conflict involving the U.S., Israel, and Iran threatened to close the strait, the Oxford Institute for Energy Studies analyzed the impact of a potential closure lasting more than a year. They found that 15% of the global liquefied natural gas supply would be lost, with Europe, China, India, and Japan being the most affected in terms of lost imports.
Oil prices have soared due to the instability. Brent crude, a global pricing benchmark for most internationally – traded crude oil, jumped by as much as 13% on Monday to $86 a barrel. Analysts warn that attacks on energy infrastructure in the Gulf or an extended closure could push it to [price]. The last time oil prices were that high was in 2022, after Russia’s invasion of Ukraine led to extensive international sanctions targeting Russian petroleum exports. Prices have remained below $80 for the past year.
Most banks and analysts currently view the possibility of even higher oil prices or a forced closure of the strait as a small risk. For example, [entity] put the chance of a [scenario] in a Monday note. Analysts have also pointed out the logistical difficulties Iran would face in ordering and maintaining a closure of the strait, including [factors] in the region and the risks the regime would take by cutting off energy supply. The threat of closure is not new to the Islamic Republic, which has threatened to close the strait multiple times in the past but has never followed through.
In a [report] by the energy consultancy Wood Mackenzie, researchers noted that the closest historical parallel would be the 1970s, when an oil supply crisis triggered economic downturns in several countries around the world. However, the analysts noted that the world is now much less dependent on oil. To create a similar – scale global economic crisis, they wrote, oil prices would need to reach around $200 a barrel.
Such a reduction in global supply and the associated risk to the world economy would likely be unacceptable even in the U.S., the Wood Mackenzie analysts added.
“A sustained conflict that significantly restricts transit through the Strait of Hormuz, raises oil and LNG prices, and weakens an already fragile global economy poses a significant political risk for the U.S,” they wrote. “A sharp, negative reaction in global financial markets could prompt the Trump Administration to find a way out and de – escalate.”