Iran closes the Strait of Hormuz – what impact will it have on the world?
As fighting in Iran boils over, the most strategic oil passageway in the world – the Strait of Hormuz – is in the spotlight.
Concerns have been raised about just disruptions to the flow of Gulf oil shipments to Europe, the US and Asia after Iran said it was ‘closing’ the shipping lane.
About a fifth of the world’s oil is transited through the shipping lane, which splits Iran on one side and Oman and the UAE on the other, and links the Persian Gulf to the Gulf of Oman and the Arabian Sea in the Indian Ocean.
Iran’s attacks on neighbouring Gulf States have prompted major energy companies, like QatarEnergy, to halt the production of liquefied natural gas, and global prices have already spiked.
Here’s how the closure of one of the largest shipping lanes could affect the world.
What does this mean for energy prices?
The UK imports oil and liquefied natural gas (LNG) from a variety of places, not just the Middle East.
However, if supplies passing through the Strait of Hormuz are disrupted, then demand for alternatives goes up and there could be a significant rise in gas and electricity prices, which is what happened after Russia’s invasion of Ukraine in 2022.
David Aikman, director of the National Institute of Economic and Social Research, warned: ‘If it persists, it will raise household bills and business costs in the months ahead, putting renewed upward pressure on inflation.”
Petrol stations across the UK are already seeing ‘sorry we are out’ signs as gas prices skyrocket and people look to fuel up.
Drivers have been told ‘not to panic buy’ by the AA as oil prices have subsequently skyrocketed, with the global benchmark Brent crude increasing by 13% – the highest level recorded since July 2024.
In Greater Manchester, dozens of vehicles were seen waiting for petrol at the Trafford Centre.
And in Kirkdale, Liverpool, queues for pumps stretched beyond stations and into nearby roads.
Shop prices could increase as well
UK retailers are bracing for knock-on effects that could reach British shoppers in the form of higher prices and fewer discounts.
Again, the impact will depend on how long the conflict lasts, but rising oil and shipping costs alongside disruption to supply routes and raw materials could start to filter through to shop prices in the months ahead.
Analysts have said specific categories to watch include fragrance, as the Middle East plays a key role in producing ingredients used in many perfumes, particularly oud and other luxury scent bases.
The countries currently affected by conflict are also significant producers of dates, olive oil, nuts and spices such as saffron.
However, fashion, electronics and homeware could also be affected if freight costs increase or delivery times lengthen, as many UK brands rely on global supply routes that pass through or near the region.
Why is the Strait of Hormuz so important?
Tankers collecting from various ports on the Persian Gulf must go through Hormuz, a 60-mile-wide part of the Persian Gulf which has been at the heart of regional tensions for decades.
Although most chokepoints can be bypassed by using other routes, which often add significantly to transit time, some have no alternatives.
Maritime ship experts say shipowners are increasingly wary of using the waterway, with some ships having tightened security and others cancelling routes there.
Can Iran actually close the Strait of Hormuz?
Technically, yes.
The UN allows countries to exercise control of their territorial seas up to 13.8 miles from their coastlines, and some portions of the Strait lie entirely in Iran and Oman’s territorial waters.
Iran’s navy has been severely damaged by strikes, and it remains unclear just how it would have the manpower to shut it down, but experts warned the IRGC could lay mines using fast attack boats.
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