Has Iran Closed Strait Of Hormuz? What This Strategic Oil Route Is And How It Could Hit Global Crude Prices

Iran on Monday threatened that it will fire any ship which will try to cross the Strait of Hormuz, effectively leading to the closure of the strategically important and world’s most critical oil chokepoint. There is, however, no clarity whether the strait is completely closed as of now. Reuters on Monday reported, quoting an Iranian Revolutionary Guards senior official, saying that Iran was closing the export route and would fire any ship trying to pass the strait. 

Is Strait of Hormuz Closed?

An IRGC official told that the Strait of Hormuz is closed and Iran will fire on any ship ​trying to pass, Iranian media reported. This is Iran’s most explicit warning, as it has earlier made symbolic threats. Iran has taken the unthinkable decision after its supreme leader, Ayatollah Ali Khamenei. The global markets are bracing for the impact. The move can threaten the flow of one-fifth of the global oil, which can eventually push crude oil prices. 

Ebrahim Jabari,  senior adviser to the Guards commander-in-chief in the IRGC, told state media that the Strait of Hormuz) is closed. 

“If anyone tries to ​pass, the heroes of the Revolutionary Guards and the regular navy will set ​those ships ablaze.”

What Is Strait of Hormuz?

The Strait of Hormuz, which is just 33 kilometres wide at its narrowest point, connects the Persian Gulf to the Gulf of Oman, and the Arabian Sea lies between Iran and Oman. However, almost 20% of the world’s gas and oil supply passes through this strait daily. That is about  20–21 million barrels of crude, condensate, and fuels being shipped through the corridor. 

OPEC nations like Saudi Arabia, Iran, Iraq, and ​the United Arab Emirates are connected with the Gulf of Oman and the Arabian Sea by this strait. This makes it the world’s most important oil export route.

After the Israel-US attack on Iran, the Brent crude price has already surged. Analysts are now saying that if the war-like situation prolongs, the price can surge above $100. If the Strait of Hormuz is completely closed, the prices are expected to cross the $120–$150 mark.

Why Is India Vulnerable To The Closure Of Strait of Hormuz?

India is heavily exposed to the oil that is shipped through the Strait of Hormuz. While India has diversified its oil imports to countries like Russia and, more recently, Brazil, Venezuela, West Africa, and the US, New Delhi imports around 2.7 million barrels of crude oil per day from the Middle East, which amounts to about 55% of the imports. Also, India’s crude buffer is reported to be very thin. Reports say that India’s total storage capacity could last as compared to China, which holds up to six months’ of crude in storage. The situation gets more complicated for India as it has recently cut oil purchases from Russia after the trade deal with the US.

While the government has stated that total storage capacity could last about 74 days, other reports suggest that effective inventories may cover only 20–25 days under current conditions. Hence, if the reports of the closure of strait are true, India becomes more vulnerable than other countries. 

When the crude oil prices increase, this will in turn lead to a spike in the prices of fuels, including diesel and petrol. This sets a chain reaction in the economy and, in turn, leads to inflation in several sectors, including transport, manufacturing, and food. Also, the increased payment for the imports depletes the foreign reserves and thus widens the trade deficit. 

Also Read: ‘We Knew Tehran Like Jerusalem’:  How Mossad Hacked Tehran’s Traffic Cameras, Tracked Khamenei For Years, & Then Rained 30 Bombs In Daylight Strike – Inside The Chilling Operation That Ended Iran’s