The Strait of Hormuz, which connects the Persian Gulf to the Indian Ocean, with Iran to the north and the UAE and Oman to the south, is a major shipping route that handles about a third of the world’s oil on water, but is under perennial tension, even more so since the friction between the U.S. and Iran in early 2019.
The Strait of Hormuz is a strategic location for global energy trade.
First and foremost, the Strait of Hormuz is critical to the global oil trade. According to data compiled by Bloomberg, nearly 12 million barrels per day of crude oil and condensate will be shipped through the strait from Saudi Arabia, Iraq, Kuwait and the United Arab Emirates in 2020.
Second, the Strait of Hormuz is also important for the transportation of liquefied natural gas, with a quarter of the world’s natural gas supply (mainly from Qatar) moving through the Strait of Hormuz to the rest of the world in 2020.
However, the situation in the Strait of Hormuz is not peaceful.
Because of its shallow depth, ships passing through the Strait of Hormuz are vulnerable to mines, and because of its proximity to land, large tankers passing through the Strait are vulnerable to shore-based missile attacks or interception by patrol boats and helicopters.
On January 4, 2020, the IRGC detained a South Korean-flagged vessel carrying petrochemicals as it was crossing the strait to the United Arab Emirates. Iranian forces also boarded a small oil tanker in the Gulf of Oman in August 2020 and shot down a U.S. unmanned reconnaissance aircraft flying across the Strait of Oman in 2019. Several companies have suspended shipping on this route due to security concerns.
Why does Iran often launch attacks against the Strait of Hormuz?
Quite simply, because of sanctions from the United States. Iran’s economy has been shrinking since 2018, and Iran has pushed up crude oil prices by disrupting Strait shipments to demonstrate its ability to fight back against the United States.
While Biden has expressed a willingness to improve relations with Iran, I fear it won’t be that easy, as tensions between the two countries have worsened due to the sanctions. Iran recently said the U.S. owes Iran $70 billion in compensation for oil sanctions and that it will increase its nuclear activities by refining more uranium.
So far Iran has not blocked the Strait of Hormuz, and analysts say it is unlikely it will block it completely because that would instead prevent Iran’s own oil exports.
Iran did not close the Strait during the 1980-1988 war between Iraq and Iran, although a tanker war between the two countries ensued, with each side attacking 451 of the other’s tanker vessels, greatly increasing the cost of tanker insurance and pushing up oil prices. in 2011, when Iran was under sanctions, it threatened to block the Strait of Hormuz, but ultimately did not do so.
In the face of tensions in the Strait of Hormuz, countries have taken action to maintain the safety of oil shipments in the Middle East.
During the Tanker Wars, the U.S. and Chinese navies took action to escort ships through the Gulf. Since then, countries such as the United Kingdom, Australia, Bahrain and the United Arab Emirates have joined the U.S.-led International Maritime Security Construct (IMSC) to secure Middle East waterways.
Who is most affected by the tensions in the Strait of Hormuz?
Saudi Arabia exports the most oil through the Strait of Hormuz, but it can divert oil to the Red Sea via a 746-mile pipeline. The UAE can partially bypass the strait by sending 1.5 million barrels per day of crude oil through a pipeline from to the Gulf of Oman port of Fujairah. Iraq, on the other hand, moves 85 percent of its oil through the Strait of Hormuz, making it highly dependent on the strait. Kuwait, Qatar and Bahrain, on the other hand, have no choice but to transport oil via waterways, making them the most dependent on the Strait of Hormuz as well.
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