What Happens to Oil Prices if Iran Closes the Strait of Hormuz?

Approximately 20-21 million barrels per day of crude oil and petroleum products transit the Strait — roughly 20% of global oil consumption and 25% of total seaborne crude trade. Additionally, about 30% of global LNG (primarily Qatar exports) passes through the same chokepoint. In absolute terms, this is more oil than any single country except the United States consumes daily.

Only partially. Saudi Arabia's East-West Pipeline (Petroline) has 4.8 mbpd nameplate capacity but currently operates at roughly 2.5 mbpd and needs 60-90 days to surge to full capacity. The UAE's Habshan-Fujairah pipeline adds 1.5 mbpd. Combined bypass capacity covers roughly 3.5-4 mbpd within 30 days — against a 17-20 mbpd shortfall. The Iraq-Turkey Kirkuk-Ceyhan pipeline (400,000 bpd) is currently suspended. There is no quick engineering fix for a structural chokepoint.

In a sustained closure lasting 2+ weeks, Brent crude would likely reach $130-150/bbl within the first week and potentially $150-180/bbl within 30-60 days as inventories draw down. An extended closure beyond 2 months could push prices toward $180-220/bbl before demand destruction provides a ceiling. For context, the 1973 embargo (which removed far less supply in absolute terms) quadrupled oil prices, and the 2022 Russia-Ukraine shock briefly pushed Brent to $139/bbl on mere threat of disruption.

Qatar exports approximately 77 million tonnes per year of LNG — about 30% of global LNG trade — all through the Strait of Hormuz. A closure would simultaneously cut one-third of global LNG supply. European TTF gas prices would spike from roughly EUR 30/MWh to EUR 80-150/MWh within weeks, recreating the 2022 energy crisis. Asian LNG spot prices (JKM) would surge from approximately $12/MMBtu to $30-50/MMBtu. US Henry Hub would also rise to $5-8/MMBtu as export demand surges.

Iran has substantial asymmetric capabilities: 2,000-3,000 mines, fast-attack craft swarms, shore-based anti-ship missiles, and submarine assets. Even against active US Navy countermeasures, a partial or contested closure could persist for 2-6 weeks. Full mine clearance of the 34-mile navigable channel could take 30-90 days. However, Iran has never actually closed Hormuz despite decades of threats, and a full closure cuts Iran's own export revenue. The most likely scenario is selective harassment lasting 1-3 weeks rather than a total blockade.

Primary beneficiaries include oil producers (especially non-Gulf producers like US shale), tanker companies operating outside the Gulf, defense contractors, gold miners, LNG terminal operators, and uranium/nuclear energy stocks. The hardest hit sectors are airlines (jet fuel is 25-35% of costs), consumer discretionary (gasoline spike destroys purchasing power), European and Japanese equities (extreme energy import dependence), and oil-importing emerging markets (currency crises in Turkey, India, Pakistan). Refiners with non-Gulf crude supply benefit from exploding crack spreads.