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Strait talk: Why Hormuz is everyone’s problem
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5 min read | Updated on June 23, 2025, 10:10 IST
SUMMARY
Tensions are rising in the Middle East, and the Strait of Hormuz is back in the spotlight. It plays a vital role in the global oil trade, and any threats to it can spike energy prices. With crude prices already surging, the world is carefully monitoring any disruptions in oil supply via this narrow and critical pathway.
The Strait of Hormuz accounts for more than 20% of the global oil trade
Since the Iran-Israel tensions have started (around 13th June 2025), oil prices have risen anywhere between 7-10%. Ongoing tensions in the region threaten to create a spiral in the prices, and the critical Strait of Hormuz is now in spotlight.
Picture a congested toll booth along an interstate that virtually every gas tanker has to travel through. If it becomes backed up, traffic will be stopped, gas stations will run dry, and prices could double overnight. The Strait of Hormuz is such a toll booth—a tight but important choke point through which much of the world's oil passes, linking oil-producing Gulf states to oil-hungry markets.
Strategically as important as it is, any blockade or interference in Hormuz would send oil prices soaring, and especially so for a nation like India.
Importance of Strait of Hormuz
As the U.S. Energy Information Administration (EIA) it’s known as the "world’s most important oil chokepoint". But why is it called that? That’s because it’s a big oil checkpoint, where every day nearly 20% of the world’s oil supply passes through this narrow sea lane.
About 20 million barrels of oil per day flows through Hormuz. If this kind of volume were to get clogged even partially, the effects would be felt worldwide in the form of a supply shortage and spiking energy prices.
Besides oil, Hormuz is a key artery for LNG. Infact, 20% of the world’s LNG exports also pass through it. Qatar, the world’s largest LNG exporter, and the UAE ship most of their gas through this route, with no alternative available.
Volume of products transported through the Strait (Million barrels per day)
| 2022 | 2023 | 2024 | 1Q25 | |
|---|---|---|---|---|
| Total oil flow through Strait of Hormuz | 21.4 | 21.4 | 20.3 | 20.1 |
| Crude oil and condensate | 16.0 | 15.5 | 14.3 | 14.2 |
| Petroleum products | 5.5 | 5.8 | 5.9 | 5.9 |
| World total petroleum and other liquids consumption | 99.5 | 101.8 | 102.7 | 102.1 |
| LNG flows (Billion cubic feet per day) | 11.0 | 10.5 | 10.3 | 11.5 |
Source: U.S. Energy Information Administration
For India, which imports about 90% of its crude oil, most of it from the Gulf, this passage is a non-negotiable route. A disruption here would mean inflated oil prices, higher import bills, and broader economic implications.
Positioning
The Strait is sandwiched between Iran and Oman. Despite being only 33 km wide, it handles colossal maritime traffic through just 3 km-wide channels in either direction. While Saudi Arabia and the UAE have limited pipeline infrastructure as backups, most oil and LNG exports still rely on shipping through Hormuz.
Source: chinaglobalsouth.com
Which countries benefit from it?
When it comes to which all countries benefit from this chokepoint, there are several of them
Exporters
OPEC members, Saudi Arabia, Iraq, the UAE, Kuwait, and Iran all export a bulk of their crude oil via the Strait. For some countries like Kuwait and Qatar it’s their only route for oil and gas exporting.
Importers
Most of the buyers of the Gulf oil and gas is primarily in Asia, about 70-80% of the oil shipped via the Strait. China, India, Japan, and South Korea are the top importers. The economic growth and energy stability of Asian countries heavily rely on the functioning of this chokepoint.
China’s reliance on Hormuz route
China imports over 50% of its crude oil from Gulf countries, making the Strait of Hormuz a critical lifeline for its energy needs. It also relies heavily on LNG shipments from Qatar, all of which pass through this narrow chokepoint.
In 2021, China’s oil imports from the Gulf exceeded $128 billion, underlining how deeply tied its economy is to this corridor. A disruption here wouldn’t just impact fuel prices, which could ripple across China’s manufacturing and industrial output.
To manage this strategic risk, China had stepped up its diplomatic efforts by brokering a détente between Saudi Arabia and Iran and also by expanding its naval presence along key trade routes.
That said, China is also a major importer of oil from Iran. Press reports indicate that most of these imports are illegal. As our readers are aware, we do not make any political comments. But the point of mentioning this, with a major power like China depending on Iran and the Strait, Iran is unlikely to take any hasty action to close the route.
More importantly, at a time of conflict, Iran will look to ensure that its revenues from oil trading are not impacted.
Where do things stand now?
So far when it comes to crude oil supply not a single barrel has been lost. As so far it remains in everyone's interest to keep the Strait running. Even though we saw a rise in the price of crude, this is a rational response to an escalating conflict, especially when it is not showing any signs of cooling off.
Historically, even during past Middle Eastern conflicts, the Strait of Hormuz has never been fully blocked. However, Iran has on occasion boarded and detained tankers, demonstrating its ability to disrupt operations without a complete shutdown.
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