Following the ongoing conflict between the United States of America, Israel and Iran which caused United States to bomb the Iran's nuclear sites, Iran has threatened to close the Strait of Hormuz, a decision that may cause major shift in global peace and economy.

What is Strait of Hormuz? 

The Strait of Hormuz is a vital waterway connecting the Persian Gulf to the Gulf of Oman and the Arabian Sea. 

The Strait of Hormuz is situated between Iran to the north and the United Arab Emirates and Musandam Governorate (Oman) to the south.

The strait of Hormuz is a crucial shipping lane for oil exports from the Middle East, particularly from countries such as Iran, Iraq, Kuwait, and Saudi Arabia. It's estimated that around 20-30% of the world's oil supply passes through the strait.

The strait is approximately 90 miles (145 km) long and varies in width from 21 to 52 miles (34 to 84 km). It connects the Persian Gulf to the Gulf of Oman, providing a vital link between the Middle East and the global maritime trade network.

Shipping and Trade

The Strait of Hormuz is an important route for tankers, cargo ships, and other vessels carrying oil, natural gas, and other goods. The strait's narrow width and busy shipping traffic make it a challenging and sensitive waterway for global economy.

The strait has been a focal point of regional tensions and security concerns due to its strategic importance. There have been instances of ships being attacked or seized, and the strait has been a potential flashpoint for conflict between countries in the region.

Economic Impact of the Strait of Hormuz 

The strait plays a significant role in the global economy, particularly in the energy sector. Disruptions to shipping through the strait could have significant economic implications for countries that rely heavily on oil exports.

The Strait of Hormuz remains a critical waterway for global trade and energy security, and its stability and security are essential for the world economy.

Closing the Strait of Hormuz 

Closing the Strait of Hormuz would have significant global economic implications, particularly in the energy sector.

With nearly 20-30% of the world's oil supply passing through the strait, a closure could lead to a sharp price spike, potentially pushing Brent crude to $90 a barrel. Global energy markets would face significant turbulence.

Also, the strait is a critical waterway for international trade, and its closure would impact shipping costs, cause supply delays, and inflate prices of goods worldwide.

Noticeably, about 40% of India's crude oil imports and over half of its LNG pass through this route. A closure would lead to price fluctuations, affecting India's economy.

Closure of the strait of Hormuz will exponentially cause an increase in insurance and security measures making shipping more expensive for all parties involved.

Regional Consequences

Countries like Saudi Arabia, Iraq, and the UAE, which rely heavily on the strait for oil exports, would face significant economic losses.

However, a closure of the Strait of Hormuz could lead to further escalation in the ongoing conflict between Iran and the US, potentially drawing in other countries.

How Closure of Strait of Hormuz Affect Some Specific Countries?

China

As Iran's largest trading partner and oil customer, China would likely face significant economic losses and potentially intervene to prevent closure. This may draw china close to the ongoing war, and marking the first time China will go head to head against the United States and Israel is n their campaign against Iran.

Israel

As Israel imports most of its oil via the Mediterranean, it might not be directly affected by a blockade but there may be more devastation in the country as Iranian allies will rise to defend a partner.

The Strait of Hormuz is a vital artery for global oil trade, and any disruption would have far-reaching consequences for the world economy.