How The Strait of Hormuz, A Narrow Stretch of Water Where Ships Carry $1.2 Billion of Oil Every Day, Is at The Heart of Spiraling Tensions With Iran

05/02/2020 How the Strait of Hormuz, a narrow stretch of water where ships carry $1.
arry $1.2 billion of oil every day, is at the heart of spiraling tensions with Iran | …
BRIEFING
(HTTPS://WWW.BUSINESSINSIDER.COM.AU
How the Strait of

Hormuz, a narrow
stretch of water
where ships carry
$1.2 billion of oil
every day, is at the
heart of spiraling
tensions with Iran
ALEXANDRA MA
JUL 9, 2019, 9:36 PM
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TO=&BODY=I
OF- OF- OF- OF- THOUGHT
HORMUZ- HORMUZ- HORMUZ- HORMUZ- THAT YOU'D
EXPLAINER- EXPLAINER- EXPLAINER- EXPLAINER- BE
OIL-US-IRAN- OIL-US- OIL-US- OIL-US- INTERESTED
TENSIONS- IRAN- IRAN- IRAN- IN THIS
2019- TENSIONS- TENSIONS- TENSIONS- ARTICLE
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INSIDER
https://www.businessinsider.com.au/strait-of-hormuz-explainer-oil-us-iran-tensions-2019-7?r=US&IR=T 1/21
05/02/2020 How the Strait of Hormuz, a narrow stretch of water where ships carry $1.2 billion of oil every day, is at the heart of spiraling tensions with Iran | …
Recent tensions between Iran AUSTRALIA:
(https://www.businessinsider.com/catego
HTTPS://WWW.B
and the US are threatening the safety of

OF-
the world’s ships and movement oil in
HORMUZ-
the Strait of Hormuz.
The narrow strait is the most important
EXPLAINER-
chokepoint for the world’s oil supply.

OIL-US-
Some 21 million barrels – or $US1.2

IRAN-
billion
TENSIONS-
(https://markets.businessinsider.com/co
2019-
price?type=wti) worth of oil – pass
through the strait every day. 7&SUBJECT=HOW
One way Iran could exact its revenge on

THE STRAIT
the US and its allies is by shutting or

OF HORMUZ,
harassing tankers in the strait, which

A NARROW
would disrupt oil supply and send
STRETCH OF
prices shooting up.
Visit Business Insider’s homepage for
WATER
more stories WHERE
(https://www.businessinsider.com/?
SHIPS
hprecirc-bullet).
CARRY $1.2
BILLION OF
Tensions between the West and Iran

OIL EVERY
bubbled to a historic height in recent
DAY, IS AT
days after the assassination of top
Iranian military commander Qassem
THE HEART
Soleimani OF
(https://www.businessinsider.com/category
SPIRALING
soleimani) and Tehran bombed two Iraqi

TENSIONS
bases that housed US troops
WITH IRAN)
(https://www.businessinsider.com.au/iran-
missile-strike-iraq-video-2020-1).
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UP NEXT
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THESE ARE LOADED WHISKEY CREAM BEIGNETS
They have sparked fears of wider US-Iran

attacks in the greater region, which
could take place in and around the Strait
of Hormuz, a narrow body of water
linking the Persian Gulf to the Gulf of
Oman, which feeds into Arabian Sea and
the rest of the world.
(https://static.businessinsider.com/image/5d
Google Maps/Business Insider
Map showing the Strait of Hormuz, a narrow mouth of the
Persian Gulf where 21 million barrels of oil pass through every
day.
While Iran’s leaders claim to have

“concluded” their revenge for
Soleimani’s death – and President
Donald Trump appears to believe them
(https://www.businessinsider.com.au/trum
says-iran-standing-down-after-missile-
attack-in-iraq-2020-1) – many regional
experts and diplomatic sources say Iran
could unleash other modes of attack,
which include unleashing allied militias
to disrupt the Middle East
missile-strike-revenge-not-finished-
2020-1).
One strategy could include Iran closing

the Strait of Hormuz, which would stop
oil tanker traffic, disrupt global oil
supply, and send prices shooting up.
Here’s what you need to know about this

valuable strait.
Why is the Strait of

Hormuz important?
Though the strait is tiny – at its
narrowest point it is just 33 km (21 miles)
across – it’s a geopolitically and
financially crucial chokepoint.
It’s the world’s busiest shipping lane,

chiefly because there are limited
alternatives to bypass the strait. Most of
the oil that passes through the strait
come from Saudi Arabia, the US Energy
Information Administration (EIA)
reported
(https://www.eia.gov/todayinenergy/detail.p
id=39932).
Some 21 million barrels of crude and

refined oil pass through the strait every
day, the EIA said, citing 2018 statistics.
That’s about one-third of the world’s sea-

traded oil, or $US1.2 billion worth of oil a
day, at current oil prices
(https://markets.businessinsider.com/comm
price?type=wti).
(https://static.businessinsid
Hamad I Mohammed/Reuters
Oil tankers pass through the Strait of Hormuz on
December 21, 2018.
How important is the

strait to the US and its
allies?
The US and many of its allies have
billion-dollar reasons to protect the
Strait of Hormuz.
The majority of Saudi Arabia’s crude

exports pass through the Strait of
Hormuz, meaning much of the oil-
dependent economy’s wealth is situated
there. Saudi state-backed oil tanker

Bahri temporarily suspended its
shipments through the strait after Iran’s
missile strikes in Iran, the Financial
Times reported
(https://www.ft.com/content/161dbe52-
3211-11ea-a329-0bcf87a328f2).
The UK Royal Navy has also sent vessels

to escort British ships to protect them
from potential attacks amid the
heightened tensions, the Press
Association reported
(https://www.theguardian.com/uk-
news/2020/jan/04/royal-navy-vessels-
sent-to-protect-shipping-in-strait-of-
hormuz).
It has good reason to worry: last July,

Iran’s Revolutionary Guards seized two
British oil tankers
(https://www.businessinsider.com.au/britis
flagged-vessel-headed-for-iran-stena-
impero-2019-7) sailing in the strait’s
international waters and, according to
the UK, attempted to harass another
British tanker
gunboats-try-seize-oil-tanker-persian-
gulf-uk-frigate-2019-7).
(https://static.businessinsider.com/image/5b5
Michael Gruber/Getty Images; Olivier Douliery-Pool/Getty Images;
Samantha Lee/Business Insider
A composite image of Iranian President Hassan Rouhani and US
President Donald Trump.
Last June Iran shot down a US drone

flying near the strait
drone-shooting-warning-different-
airspace-accounts-2019-6), and a month
later a US warship – USS Boxer – also
shot down
(https://www.businessinsider.com.au/penta
confirms-the-uss-boxer-shot-down-an-
iranian-drone-2019-7) an Iranian drone
says-us-shot-down-own-drone-mistake-
2019-7) in the same area.
Shortly after Iran’s drone attack,

President Donald Trump questioned the
US’ presence in the region, and called on
China, Japan, and other countries to
protect their own ships
calls-on-china-others-protect-own-
ships-iran-2019-6) passing through the
Strait of Hormuz.
Trump noted that much of China and

Japan’s oil flow through the strait, and
added: “So why are we protecting the
shipping lanes for other countries (many
years) for zero compensation.”
While a large proportion – 76% – of oil

flowing through the chokepoint does
end up in Asian countries, the US still
imports more than 30 million barrels of
oil a month from countries in the Middle
East, Business Insider has reported
calls-on-china-others-protect-own-
ships-iran-2019-6), citing the EIA.
That’s about $US1.7 billion worth of oil,

and 10% of the US’s total oil imports per
month.
(https://static.businessinsider.com/image/5e1
Ebrahim Noroozi/AP
Iranian mourners hold posters of Maj. Gen. Qassem Soleimani in
Tehran on January 6, 2020. He was revered in Iran.
How do US-Iran tensions

a ect it?
Oil prices swung wildly
(https://markets.businessinsider.com/comm
price-fell-after-spike-iran-missile-
attacks-reasons-why-2020-1-1028803319)
as news broke of Iran’s missile strikes on
US targets and the subsequent relief that
neither lives nor energy infrastructure
were harmed.
Iranian leaders, who have also vowed

retaliation for the death of Soleimani,
have threatened to close down the strait
multiple times
(https://www.businessinsider.com.au/us-
navy-faces-a-huge-liability-in-
countering-irans-use-of-sea-mines-2018-
8) in the past.
If Iran followed through with these

threats, it would likely cause huge
disruption to the global oil trade. As the
strait is so narrow, any sort of
interference in tanker traffic could
decrease the world’s oil supply, and send
prices shooting up.
Global oil prices have proven vulnerable

to tensions between Iran and the West
before. After the Trump administration
said in April 2019 it would stop
providing sanctions waivers to countries
who purchase Iranian oil, prices rose to
their highest level since November the
year before, Axios reported
(https://www.axios.com/iran-oil-
sanctions-waivers-price-mike-pompeo-
db296725-8f92-4d3a-9bfc-
3b708d636a81.html).
And because the US would be affected by

global oil prices, regardless of the origin
of the oil, Washington would still have
an interest in protecting the Strait of
Hormuz.
Kenneth Vincent, an economist at the

Department of Energy, told a 2017
conference
(http://press.georgetown.edu/newsfeeditem
strategy-rethinking-us-military-
commitment-defend-persian-gulf-oil),
cited by The Atlantic
(https://www.theatlantic.com/politics/archi
does-us-protect-strait-hormuz/592654/):
“The origin of whatever molecules are
consumed in the United States does not
matter.”
“What matters is that if there’s a

shooting war somewhere in the Middle
East, those molecules will cost more and
that will harm the American economy,”
he said.
(https://static.businessinsider.com/image/5d
AP Photo/ISNA
An oil tanker on fire in the Gulf of Oman on June 13, 2019. Iran
has denied responsibility for the attack.
How likely is Iran to shut

down the strait?
Iran is more likely to disrupt traffic in
the Strait of Hormuz than to engage in
an all-out conventional war with the US,
which is much stronger militarily.
But doing so comes with high costs to

Iran.
To close down the entire strait, Iran

would have to place at least 1,000 mines
with submarines and surface craft along
the chokepoint, security researcher
Caitlin Talmadge posited in a 2009 MIT
study
(https://dspace.mit.edu/bitstream/handle/1
2009-
Costs%20and%20Difficulties%20of%20Blo
sequence=1&isAllowed=y). Such an
effort could take weeks, the study added.
Disrupting oil traffic on the strait would

also result in oil importers around the
world looking beyond the Middle East
for their sources, and further reduce
reliance on the region.
Iran’s oil industry is already suffering

after the US imposed sanctions designed
to stop countries from importing Iranian
oil earlier this year.
As Michael Knights, a Middle East expert

at the Washington Institute think tank,
told The Atlantic last May
(https://www.theatlantic.com/politics/archi
could-hit-back-boltons-us-carrier-
move/588826/): “They’d be cutting their
own throat if they close the strait.”
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05/02/2020 How the Strait of Hormuz, a narrow stretch of water where ships carry $1.

How the Strait of

OF- OF- OF- OF- THOUGHT

HORMUZ- HORMUZ- HORMUZ- HORMUZ- THAT YOU'D

EXPLAINER- EXPLAINER- EXPLAINER- EXPLAINER- BE

OIL-US-IRAN- OIL-US- OIL-US- OIL-US- INTERESTED

TENSIONS- IRAN- IRAN- IRAN- IN THIS

2019- TENSIONS- TENSIONS- TENSIONS- ARTICLE

Recent tensions between Iran AUSTRALIA:

and the US are threatening the safety of

chokepoint for the world’s oil supply.

Some 21 million barrels – or $US1.2

One way Iran could exact its revenge on

the US and its allies is by shutting or

harassing tankers in the strait, which

more stories WHERE

Tensions between the West and Iran

soleimani) and Tehran bombed two Iraqi

THESE ARE LOADED WHISKEY CREAM BEIGNETS

They have sparked fears of wider US-Iran

While Iran’s leaders claim to have

One strategy could include Iran closing

Here’s what you need to know about this

Why is the Strait of

It’s the world’s busiest shipping lane,

Some 21 million barrels of crude and

That’s about one-third of the world’s sea-

How important is the

The majority of Saudi Arabia’s crude

there. Saudi state-backed oil tanker

The UK Royal Navy has also sent vessels

It has good reason to worry: last July,

Last June Iran shot down a US drone

Shortly after Iran’s drone attack,

Trump noted that much of China and

While a large proportion – 76% – of oil

That’s about $US1.7 billion worth of oil,

How do US-Iran tensions

Iranian leaders, who have also vowed

If Iran followed through with these

Global oil prices have proven vulnerable

And because the US would be aﬀected by

Kenneth Vincent, an economist at the

“What matters is that if there’s a

How likely is Iran to shut

But doing so comes with high costs to

To close down the entire strait, Iran

Disrupting oil traﬃc on the strait would

Iran’s oil industry is already suﬀering

As Michael Knights, a Middle East expert

Business Insider Emails & Alerts

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