On 28 February, Israel and the United States started their bombing campaign against Iran. Israel codenamed it Operation Roaring Lion, and the United States codenamed it Operation Epic Fury. The joint Israeli-American campaign aims at regime change in Iran, preventing the country from acquiring nuclear weapons. In response to the Israeli-American strikes, Iran’s Revolutionary Guard has warned ships not to pass through the Strait of Hormuz.
The Strait of Hormuz is a vital waterway through which a considerable portion of the world’s energy supplies pass every day. About 20 million barrels of crude oil and oil products pass through the strait each day, which constitutes about 20 per cent of the world’s seaborne oil trade, or about 20 per cent of the world’s oil supplies.
However, since 28 February this amount has decreased to only four million barrels per day, mostly of Iranian oil. More than 80 per cent of the oil that passes through the strait goes to Asia (38 per cent to China, 15 per cent to India, and the rest to Japan, South Korea, and other Asian countries), which makes the strait vital for the Asian economy.
Only three per cent of the oil that passes through the strait goes to Europe, which has been diversifying its energy resources since the Russian invasion of Ukraine in February 2022. Another three per cent goes to the United States. About 20 per cent of the world’s liquified natural gas (LNG) passes through the Strait of Hormuz, mostly from Qatar. The strait is therefore a global economic chokepoint, the closure of which can have negative repercussions on the world economy.
For decades, Tehran has been threatening to close the Strait of Hormuz if Israel or the United States attacked Iranian territory. However, closing the strait was always seen as a double-edged sword for Iran. The Western and global economy would be hit by the closure of the strait. But so would the Iranian economy, which is heavily reliant on oil exports.
On 2 March, an oil tanker, the Sky Light which was flying the flag of the Republic of Palau, was hit off the coast of Oman by Iranian missiles. The 20-member crew was safely evacuated, and no one was killed. At the time of writing, about 150 oil tankers have been stranded, waiting to pass through the strait. Usually, about one hundred ships pass through the strait each day, but after its closure only about six ships have passed through it.
Global insurance companies have increased their prices, and they are less willing to bear the costs of any damage as a result of the closure of the strait or Iranian attacks on shipping.
In addition to closing the Strait of Hormuz, Iran has also been targeting oil facilities in the Arab Gulf states, including Saudi Aramco facilities and other similar facilities in the Gulf. The Ras Laffan industrial city in Qatar, which produces LNG, has paused operations due to Iranian attacks, and this could have a negative effect on European markets that have been increasingly dependent on Qatari gas.
Tehran’s strategy seems to be to cause a rise in global energy prices and to slow down the global economy, in order to force the world to stop the war. This strategy could also raise the prices of fuel for American consumers, which could cost the Republican Party dear in the upcoming US midterm elections in November, especially since inflation and the rise of consumer prices is a major issue for American voters.
In response to the attacks on Iran and the closure of the Strait of Hormuz, global oil prices have risen. Brent crude has risen by about nine per cent as a result of the crisis, reaching more than $79 a barrel. West Texas Intermediate (WTI) has also risen by about eight per cent to about $72 per barrel.
The global markets have been expecting an American strike on Iran, given US President Donald Trump’s statements over the past few weeks and the American military buildup in the region. But the size of the strikes and the Iranian reaction have taken the global economy by surprise.
Some experts are concerned that oil prices might reach $100 a barrel if the war escalates, having a negative effect on the global economy. But others say that oil prices are unlikely to reach the $100 mark for now, because the year began with a surplus of global oil supplies and with large strategic reserves held by China, India, and Japan.
There are alternatives to the Strait of Hormuz that the Arab Gulf states could use to transport their oil to world markets, but these are not as economically feasible. Saudi Arabia could use the East-West Pipeline, for example, which links the oil fields in the east of the country to the Red Sea, from where oil tankers could sail north through the Suez Canal, a safe route, or south through the Bab Al-Mandeb Strait, not a good option because of the actions of the Houthi rebels in Yemen.
The East-West Pipeline has a capacity of about four million barrels per day (mbpd).
In much the same way, the UAE could use the Abu Dhabi Pipeline that has a capacity of one mbpd and carries UAE oil directly to the Gulf of Oman, thus bypassing the Strait of Hormuz. However, these two pipelines would bring the total amount of oil bypassing the Strait of Hormuz to only about five mbpd, out of the 20 passing through the strait.
In terms of production, the OPEC+ countries consisting of members of the OPEC oil cartel, in addition to other non-OPEC producers such as Russia and others, have pledged to raise oil production by 0.2 per cent or about 206,000 barrels per day. But this is a modest increase that is unlikely to have a real effect in terms of moderating global oil prices. Iran is a member of OPEC, but it did not participate in the supply increase.
A major uncertainty is the duration of the military operations against Iran. Trump has said that the operation could last for four weeks, but he is known for being unpredictable. Another unknown is the extent to which the Iranian economy will be able to withstand the closure of the strait and the duration of its closure.
The world economy will have to wait for events to develop.
* A version of this article appears in print in the 5 March, 2026 edition of Al-Ahram Weekly
Short link: