It's the narrow channel connecting the Persian Gulf to the Gulf of Oman, with Iran to the north, Oman to the south, through which around 15% of the global oil supply passes. The Strait of Hormuz has once again become a focal point for global energy markets as tensions between Iran, Israel and the U.S. continue to escalate.
The waterway is one of the busiest shipping routes in the world. It provides the only sea passage for the Persian Gulf oil and natural gas facilities of Qatar, Kuwait, Saudi Arabia to the open ocean. An average of about 20 million barrels of crude oil and oil products move through the Strait of Hormuz each day, according to the U.S. Energy Information Administration. About 15% of global crude oil supply and 20% of liquefied natural gas, or LNG, passes through the Strait of Hormuz, according to Morgan Stanley analysis released on Tuesday.
Those supplies are key inputs for gasoline, chemicals and electricity everywhere from China to the U.S.
As Israel continues to widen its war against Iran, with comments from President Donald Trump increasingly signaling the U.S. may be close to more active involvement, reports have suggested that Iran could "close" the Strait of Hormuz. Closing the strait means Iran would impose layered levels of threat against attempting to cross the passage.
Iran "absolutely has the ability to close this strait," wrote former British Royal Navy officer Tom Sharpe, writing in The Telegraph on June 16. Iran's layered threats including mines, fast attack craft, surface drones, small submarines and mobiles ballistic missiles vessels. Mine clearing, Sharpe wrote, "is one of the U.S. Navy's few weaknesses."
While none of those threats have materialized, the U.S.-led Combined Maritime Force's Joint Maritime Information Center issued an advisory on Monday saying that a spike in electronic interference was scrambling ships' navigation systems. The JMIC said the interference was coming from points in Iran and "several other areas in the Arabian Gulf."
The interference has already started to affect shipping. A full closure would have a major impact on global energy markets.
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The Effect On Oil Prices
"The oil market remains on edge with the conflict between Israel and Iran entering its sixth day. Prices have rallied around 10% since Israel started its attack on Iran last week and are now close to a five-month high after U.S. President Trump met with his national security team on Tuesday to discuss the escalating conflict, sparking speculation that the U.S. could be preparing to join the attack," ING analysts Ewa Manthey and Warren Patterson wrote Wednesday.
U.S. crude oil prices remained steady on Wednesday compared to the previous session, trading at $75 per barrel. Brent futures, the international benchmark, was also steady around $76.50 per barrel. Meanwhile, U.S. natural gas prices increased about 3.5% to $3.98 per British thermal unit.
Strait Of Hormuz: Navigational Interference
While the Israeli airstrikes, and Iran's response, have not yet directly affected the global shipping industry, electronic interference with ship navigation systems has increased in recent days around the Strait of Hormuz. Kpler, a global energy research firm, said in a recent note to clients that several crude-oil carriers have experienced electronic interference.
On Tuesday, two oil tankers, one a Frontline vessel, caught fire after colliding in the Gulf of Oman.
Norway-based Frontline told the Wall Street Journal Tuesday the collision was due to navigational issues and not a direct result of airstrikes.
On Tuesday, Qatar also requested LNG vessels to remain outside the Strait of Hormuz until they were ready to load as the situation grows increasingly uncertain. Qatar is the third-largest exporter of LNG, making up around 20% of global trade and all this supply must move through the Strait of Hormuz, according to ING.
"The global LNG market is balanced now, but any disruptions would push it into deficit and increase competition between Asian and European buyers," Patterson and Manthey wrote Wednesday.
Meanwhile, Trump on Tuesday called for Iran's "unconditional surrender," amid reports that the U.S. joining Israel's attacks is "on the table." Trump also said that "we" have control over Iran's airspace.
Trump held a national security meeting in the White House Situation Room on Tuesday. According to multiple reports, he was considering a potential U.S. airstrike on Iran.
Stock Market Reaction
Selling picked up Tuesday afternoon as Wall Street worried that unrest in the Middle East could result in deeper U.S. involvement.
However, among oil and gas producers, Gulfport Energy rallied for a fifth straight session and closed just below a 200.75 buy point, according to MarketSurge charts. Antero Resources and Range Resources are still in buy zones after recent breakouts.
Oil tanker stocks Frontline, Teekay Tankers and International Seaways are ones to watch.
Frontline dropped around 1% to 19.58 during Wednesday's stock market, after advancing nearly 5% on Tuesday. FRO is up more than 7% in June and reclaimed its 200-day moving average.
Frontline shares are up 38% for 2025 and have risen about 60% following their April 4 low of 12.40.
Teekay Tanks fell 1.2% Wednesday following Tuesday's 3% advance to 47.22.
International Seaways shares moved 1.2% higher in the stock market Wednesday. INSW gained more than 4% Tuesday to 40.46.
Could The Strait Of Hormuz Close?
ING analysts Wednesday wrote that energy markets continue to monitor the escalating Israel-Iran conflict, focusing on any signs that Iran may seek to disrupt crude flows across the Strait of Hormuz.
Shocks to the Strait of Hormuz is an ever-present fear during conflicts that include Iran, and Tehran has often threatened to cut off the trade route.
Iran has threatened to close the Strait of Hormuz numerous times going back 1980. Closures of the key oil and gas trade route were floated during the Iran-Iraq War in the 1980s, as well as in 2008, 2011, 2012, 2019 and 2022, according to analyst research.
A short-term Strait of Hormuz closure could add $8.25 to $31.25 to the cost of a barrel of oil, according to ClearView Energy Partners.
Threatening to close the Strait thus boosts Iran's energy earnings. But actually closing the Strait would be tricky, invite a further military response and cut off many of Iran's own exports.
"Despite concerns about the Strait in the past, flows have in the end never been blocked," Morgan Stanley analyst Devin McDermott wrote Tuesday.
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"The biggest fear for the oil market is the shutdown of the Strait of Hormuz. This could impact oil flows from the Persian Gulf," the ING analysts noted Wednesday, adding that a "significant disruption to these flows" could push prices to $120 per barrel.
Morgan Stanley analysts on Monday wrote that "increased military activity between Israel and Iran has opened up a wide range of future oil price trajectories" and that "uncertainty is likely to last for some time."
The Morgan Stanley analysts noted that if the conflict drags on it could put oil port from the wider Gulf region at risk.
"In that case, 2022-style prices would not be out of the question," Morgan Stanley analysts wrote, referring to when oil prices skyrocketed above $100 per barrel.
The Israel-Iran Conflict
Israel first launched its large-scale attack on Iran on June 12. In Israel, at least 24 people have been killed and 500 injured since the attacks began. At least 224 people have been killed and 1,277 wounded in Iran, according to the Associated Press.
Israel took "unilateral" action during the first attack, Secretary of State Marco Rubio said in a statement Friday. Trump told Fox News on Thursday that he was aware that Israel was planning to attack. The Trump administration is sending military assets to the region to support the U.S. ally, and ostensibly to defend critical shipping lanes in the region.
Israel Ramps Up Iran Attacks, U.S. Sends Ships; Defense Stocks Rise
The aircraft carrier USS Nimitz moved from the South China Sea to Indonesia's Strait of Malacca over the weekend, heading for the Middle East to join the carrier USS Carl Vinson and its strike group, Military.com reported. The Navy is moving the USS Thomas Hudner to the region to join the USS Arleigh Burke and the USS The Sullivan. All three ships have ballistic missile defense capabilities.
A wave of U.S. tanker aircraft also took off Sunday to move closer to the region.
Please follow Kit Norton on X @KitNorton for more coverage.
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