According to Drewry, the likelihood of oil transit through the Strait of Hormuz being disrupted by ongoing regional unrest is minimal. Iran has made clear that it does not intend to close the strait, as any such action would have drastic consequences for the global oil market. The Strait of Hormuz is a crucial passage, facilitating over 35% of the world’s seaborne crude oil trade.
With limited alternatives available to bypass this strategic waterway, any disruption would significantly impact oil exports from key Middle Eastern OPEC producers, including Saudi Arabia, Iran, the UAE, Kuwait, and Iraq. While some of these countries do have functional pipelines that provide overland alternatives, the total spare capacity among them is only about 4 million barrels per day (mbpd). In the event of a total blockade, over 11 mbpd of crude oil supply could be jeopardized, which would likely lead to severe market repercussions.
Although crude exports through the Strait of Hormuz have dipped in recent years due to OPEC+ production cuts, the strait still represented roughly 37% of global seaborne crude oil trade in 2024, with a significant portion—about 86%—going to Asian markets such as China, India, and Japan. The strategic significance of the Strait makes a complete closure by Iran unlikely. However, if such a scenario were to occur, global crude supply would tighten considerably, driving oil prices to unprecedented heights.
This would likely lead to decreased crude trade volumes and a reduction in tanker utilization, causing a sharp decline in freight rates. On a different note, an increase in targeted attacks on tankers in the strait could lead to partial traffic disruptions. Such risks would raise insurance premiums and operational costs.
In this context, any decrease in crude flows might support freight rates, as buyers would seek alternative sourcing methods. This shift could further influence vessel repositioning and trade patterns, ultimately sustaining or increasing the demand for both crude and product tankers.