Iran’s parliament has approved the closure of the strategically crucial Strait of Hormuz, a vital waterway for global oil shipments, in a significant escalation of tensions in the Middle East region.
This decision, if effected, could push global oil prices up from below $80 to $150 per barrel.
The decision comes after a US-led airstrike targeted Iranian nuclear facilities, prompting vows of retaliation from Tehran.
The Strait of Hormuz is a narrow passage connecting the Persian Gulf to the Arabian Sea, handling around 20% of the world’s oil and 20% of global liquefied natural gas (LNG) trade.
The waterway is crucial for the export of oil from major producers such as Saudi Arabia, Iraq, and Iran.
According to analysts, a complete closure of the Strait of Hormuz could lead to a surge in crude oil prices to above $120 per barrel, potentially even reaching $150 per barre
This would have significant consequences for global inflation, economic growth, and energy security.
“As markets reopen on Monday, investors are bracing for sharp volatility, with crude oil prices expected to surge and inflation forecasts now under intense scrutiny,”
The closure of the Strait of Hormuz would not only affect oil prices but also disrupt global supply chains, leading to increased shipping costs and delays.
India, which relies heavily on oil imports, would be particularly vulnerable, with potential implications for the country’s economy and currency.
According to the US Energy Information Administration (EIA), 84% of crude oil and condensate exports passing through the Strait of Hormuz went to Asian markets in 2024, with India, China, Japan, and South Korea being the top destinations.
