Oil prices spike, markets wobble as Iran votes to slam the gate on strategic waterway

File picture shows Iranian military personnel placing a national flag on a submarine in the Strait of Hormuz. Iran’s parliament has voted on Sunday to block the vital waterway, triggering a spike in global oil prices. AFP

On December 6, 1987, the Singapore-registered tanker Norman Atlantic went up in flames in the Strait of Hormuz after being attacked by an Iranian gunboat. A few months later, in April 1988, amid the Iran-Iraq war, the US Navy’s USS Samuel B. Roberts (FFG-58) was badly hit by a naval mine as it passed through the Strait of Hormuz. It blew an immense hole in the ship’s hull. In retaliation, US forces launched “Operation Praying Mantis” hitting Iranian targets in the Arabian Gulf (read till the end to know on what happened next).

Also Read: Western allies pressure Iran to stop threats to block Hormuz

Would a similar incident play out now?

Hold on to your petrol receipts. Iran’s parliament just gave the green light to close the Strait of Hormuz, pending final approval by the country’s Supreme Council — which, according to state-run Press TV, is expected to decide “soon”.

Already, merchant ships are steering clear of the strait amid the escalation of tensions between Iran on one side and Israel and the US on the other.

This narrow stretch of water is a key energy artery that moves 20% of the world’s oil per day — about $1 billion worth (yes, that’s daily), equivalent to ~17–20 million barrels/day and substantial LNG supplies. Iran’s decision has rocked global oil markets. On Monday, Brent crude, the global benchmark, shot up to $77.36. WTI went up to $74.15, as per oilprice.com . When oil jumps, inflation jitters follow. Suddenly, the global stock markets do the see-saw shuffle.

Why does this tiny stretch of water matter so much? Because Iran, a top oil producer, sits right next to it. And it’s a narrow gate. It’s like the landlord threatening to lock the front door on the world’s oil supply. And now they’re saying they just might. Iran exerts influence via its coast.

Does Iran have the authority or legal right to block the strait? No. Under international maritime law, no country possesses legal authority to unilaterally close the strait.

How does maritime traffic work in this strait?

While the strait is relatively narrow (33 km), it is deep enough for VLCCs, or very large crude carriers to pass through unimpeded. Ships follow a trict lane system: large tankers traverse two narrow shipping lanes.

How can Iran impose a blockade?

Iran can threaten movement with naval mines, small boat swarms or missile/drone strikes in the intervening “buffer zones”.

What do expert say about the threat? A 2008 International Security study warned Iran that could has capability to obstruct shipping for “up to a month” – unless forcefully countered.

Meanwhile, the Congressional Research Service (CRS) and Washington Institute papers, put a spotlight on Iran’s “asymmetric warfare” in the strait — with mines and swarm boats at the core. Moreover, studies from Strategic Assessment and Center for Strategic & Budgetary Assessments outline Iran’s Anti-Access/Area Denial (A2/AD) tactics, including mines, fast craft, and shore missiles.

What triggered Iran’s decision to block Hormuz? Early on Sunday (June 22, 2025), the US launched “Operation Midnight Hammer”, targeting three key Iranian nuclear sites — Fordow, Natanz, and Isfahan — with B‑2 stealth bombers, Tomahawk missiles, and among them 14 GBU‑57 bunker-buster bombs — the first combat deployment of these 14,000 kg (30,000‑lb) munitions. “Major escalation in response to US strikes on our nuclear sites will be done whenever necessary,” declared Revolutionary Guards commander Email Kosari on Sunday. Translation: Iran’s ready to shake things up.

What happens next? And if Iran makes good with the decision, oil tankers better find a new route. There’s just one problem: there isn’t one. Naturally, oil prices did what oil prices do when threats like this surface — they spiked. Countries that depend on imported oil, including China, India, and most of east Asia, could suffer economically. On Sunday (June 22), US Secretary of State Marco Rubio urged China to help deter Iran from shutting down the Strait. “I encourage the Chinese government in Beijing to call them about that because they heavily depend on the Strait of Hormuz for their oil,” Rubio said on Fox News.

What does history show? Iran has often talked about closing Hormuz and has harassed or mined shipping. But history shows it has never managed to shut this key waterway outright. Reason: Sustained closure would be just as painful for Tehran as for the rest of the world.

Has Iran ever actually closed the Strait of Hormuz? Short answer: No. Tehran has threatened or tried to disrupt traffic several times, but it has never succeeded in sealing the waterway to commercial shipping. The closest it came: the 1980-88 “Tanker War”. Iran laid naval mines in and near the strait, fired Silkworm anti-ship missiles at tankers, used small fast-attack boats to harass vessels. In response, the US re-flagged Kuwaiti tankers (“Operation Earnest Will”) and ran convoy escorts; mines were swept and traffic kept flowing. While Iran damaged ships, it never stopped the oil stream. Why did Iran fall short? For one, Iran does not have the legal right under international law to block it. On a practical note: Iran itself needed the strait for its own crude exports. Moreover, the US Navy (and its allies) quickly counter-mined and escorted traffic. The US Fifth Fleet (Bahrain-based) and allied navies have also maintained freedom of navigation patrols (FONPs). After the Iran-Iraq war, the strait’s shutdown was a recurrent threat that never materialised. In the 1990s, the chief of Iran’s Navy stated that the mission of their new Kilo-class submarines is to “control” the strait. In response, US submarines and surface groups increased patrols.

Between December 2011 and January 2012, Iranian Parliamentarians vowed to “definitely” shut Hormuz if oil sanctions bit. There were Iranian war games and missile tests, but shipping continued. In July 2018, Iran’s Revolutionary Guards Corps (IRGC) commander threatened to block all Gulf exports after US quit the Joint Comprehensive Plan of Action (JCPOA) – the Iran nuclear deal – a landmark agreement reached in 2015 between Iran and several world powers (including the US, UK, China, France, Germany, Russia, and the EU) aimed at limiting Iran’s nuclear programme in exchange for sanctions relief. There were short-lived exercises and a ballistic-missile test over the strait, but no closure.

What could Tehran try — and why is it hard? Tools: mines, shore-launched missiles, swarming speedboats, mini-subs. Challenges: US-led naval coalitions can sweep mines and reopen lanes within days.

Blocking Hormuz would strangle Iran’s own oil lifeline and foreign-currency earnings.

US and its allies have assets in the region, and could bring more, to deal with Iranian military threat.

Moreover, oil buyers can divert via other pipelines that bypass the choke-point, as per a Reuters report.

Who’s the most affected? Gulf oil producers: They will lose export capability, including Iran.

Import-dependent economies: East Asian nations feel energy disruptions swiftly.

Global markets: Higher crude costs reverberate across transportation, manufacturing, and inflation.

Shipping and insurance: Transit becomes riskier and costlier; insurers hike premiums.

The world will be watching Meanwhile, satellite eyes are on Jask — a southern Iranian port town perched just outside the strait. So, will Iran turn the Strait of Hormuz from a superhighway into a dead end? Here’s quick note on “Operation Praying Mantis”: On April 18, 1988, US retaliation destroyed, damaged, or sank two Iranian oil platforms, three warships, several armed boats, and two fighter jets. Two US Marine aviators died when their helicopter crashed into the Gulf. This time, the world will be watching as oil traders and consumers sweat it out. If things heat up there, expect headlines, market swings, and petrol pump grumbles.

Iran’s parliament pushed the nation Sunday to close the Strait of Hormuz, according to state media, but left the final decision to choke off the key waterway to Iran’s Supreme National Security Council.

It’s a move that has taken the Islamic Republic one step closer to the unprecedented action that could spike prices around the world, with about 20% of global oil and gas flowing through the narrow passageway connecting the Persian Gulf to the rest of the globe.

The energy issue is clearly top of mind for President Trump who offered two oil-focused posts on Monday morning. One called for more US drilling and another told oil companies to keep prices “down.”

“I’M WATCHING!,” he added in the all-caps missive, “‘YOU’RE PLAYING RIGHT INTO THE HANDS OF THE ENEMY.”

It was just one front — but perhaps one with the greatest economic consequences — following the Trump-ordered attack on three of Iran’s nuclear sites that drew the US into the ongoing war.

But the next steps are unclear with Iran’s National Security Council apparently weighing the decision but giving little indication of when it might decide.

Terry Haines of Pangaea Policy reached back to a famous quote from Donald Rumsfeld to describe the standoff, calling the closing of the strait one of his top “known unknowns” around the rapidly unfolding situation.

Many observers, meanwhile, are skeptical Iran will ever follow through, as the country has threatened the strait multiple times over the years but has historically opted for less disruptive measures.

But immediate economic tremors were apparent with a modest increase in oil prices seen following the attacks, some evidence of declines in strait traffic as tensions have increased, and at least two documented instances of oil supertankers pausing plans to cross the strait before resuming and passing safely.

“The near-term economic outlook hinges on global oil prices,” noted Douglas Holtz-Eakin of the American Action Forum Monday morning, saying the US’s increased energy production could shelter it somewhat but the situation represents “another layer of uncertainty to add to tariffs and a more dangerous geopolitical outlook.”

For their part, Iranian leaders say any talks with the US are on hold but haven’t outlined exactly how they are going to respond.

Major General Abdolrahim Mousavi is a top Iranian officer and vowed Monday a “proportionate response,” according to Mehr News, which is the country’s semi-official news agency.

Iran has repeatedly said in the days since the attack that U.S. military assets and troops in the region could be targets but Iranian Foreign Minister Abbas Araghchi avoided directly commenting on the strait Sunday, also according to Mehr News, saying “a variety of options are available to Iran.”

United Nations rules allow countries to exercise control up to 12 nautical miles (13.8 miles) from their coastline.

This means that at its narrowest point, the Strait of Hormuz and its shipping lanes lie entirely within Iran and Oman’s territorial waters.

If Iran were to try and block the 3,000 or so ships that sail through the strait each month, one of the most effective ways to do it, according to experts, would be to lay mines using fast attack boats and submarines.

Iran’s regular navy and the Islamic Revolutionary Guard Corps (IRGC) navy could potentially launch attacks on foreign warships and commercial vessels.

However, large military ships may in turn become easy targets for US air strikes.

Iran’s fast boats are often armed with anti-ship missiles, and the country also operates a range of surface vessels, semi-submersible craft and submarines.

Experts say Iran could block the strait temporarily, but many are equally confident that the US and its allies could swiftly re-establish the flow of maritime traffic through military means.

The US has done this before.

In the late 1980s, during the eight-year Iran-Iraq war, strikes on oil facilities escalated into a “tanker war” that saw both countries attacking neutral ships to exert economic pressure.

Kuwaiti tankers carrying Iraqi oil were especially vulnerable – and eventually, American warships began escorting them through the Gulf in what became the biggest naval convoy operation since World War II.

Smoke rises following what Iran says was an Israeli attack on Sharan Oil depot in Tehran, Iran, June 16, 2025. Majid Asgaripour/WANA (West Asia News Agency) via REUTERS/File Photo Purchase Licensing Rights , opens new tab

Summary US strikes on Iran spur fear of disruption to Middle East oil exports

Iran able to block the Strait of Hormuz, has tried in the past

Disruptions likely to be met by swift response from US Navy

LONDON, June 22 – U.S. strikes on several Iranian nuclear sites represent a meaningful escalation of the Middle East conflict that could lead Tehran to disrupt vital exports of oil and gas from the region, sparking a surge in energy prices. But history tells us that any disruption would likely be short-lived.

Investors and energy markets have been on high alert since Israel launched a wave of surprise airstrikes across Iran on June 13, fearing disruption to oil and gas flows out of the Middle East, particularly through the Strait of Hormuz , opens new tab , a chokepoint between Iran and Oman through which around 20% of global oil and gas demand flows.

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Benchmark Brent crude prices have risen by 10% to over $77 a barrel since June 13.

While Israel and Iran have targeted elements of each other’s energy infrastructure , there has been no significant disruption to maritime activity in the region so far.

But President Donald Trump’s decision to join Israel by bombing three of Iran’s main nuclear sites in the early hours of Sunday could alter Tehran’s calculus. Iran, left with few cards to play, could retaliate by hitting U.S. targets across the region and disrupting oil flows.

While such a move would almost certainly lead to a sharp spike in global energy prices, history and current market dynamics suggest any move would likely be less damaging than investors may fear.

Geopolitics and oil prices

CAN THEY DO IT?

The first question to ask is whether Iran is actually capable of seriously disrupting or blocking the Strait of Hormuz.

The answer is probably yes. Iran could attempt to lay mines across the Strait, which is 34 km (21 miles) wide at its narrowest point. The country’s army or the paramilitary Islamic Revolutionary Guard Corps (IRGC) could also try to strike or seize vessels in the Gulf, a method they have used on several occasions in recent years.

Moreover, while Hormuz has never been fully blocked, it has been disrupted several times.

During the 1980s Iran-Iraq war, the two sides engaged in the so-called “Tanker Wars” in the Gulf. Iraq targeted Iranian ships, and Iran attacked commercial ships, including Saudi and Kuwaiti oil tankers and even U.S. navy ships.

Following appeals from Kuwait, then-U.S. President Ronald Reagan deployed the navy between 1987 and 1988 to protect convoys of oil tankers in what was known as Operation Earnest Will. It concluded shortly after a U.S. navy ship shot down Air Iran flight 655, killing all of its 290 passengers on board.

Tensions in the strait flared up again at the end of 2007 in a series of skirmishes between the Iranian and U.S. navies. This included one incident where Iranian speedboats approached U.S. warships, though no shots were fired.

In April 2023, Iranian troops seized the Advantage Sweet crude tanker, which was chartered by Chevron, in the Gulf of Oman. The vessel was released more than a year later.

Iranian disruption of maritime traffic through the Gulf is therefore certainly not unprecedented, but any attempt would likely be met by a rapid, forceful response from the U.S. navy, limiting the likelihood of a persistent supply shock.

Mideast Gulf monthly oil exports

HISTORY LESSON

Indeed, history has shown that severe disruptions to global oil supplies have tended to be short-lived.

Iraq’s invasion of neighbouring Kuwait in August 1990 caused the price of Brent crude to double to $40 a barrel by mid-October. Prices returned to the pre-invasion level by January 1991 when a U.S.-led coalition started Operation Desert Storm, which led to the liberation of Kuwait the following month.

The start of the second Gulf war between March and May 2003 was even less impactful. A 46% rally in the lead-up to the war between November 2002 and March 2003 was quickly reversed in the days preceding the start of the U.S.-led military campaign.

Similarly, Russia’s invasion of Ukraine in February 2022 sparked a sharp rally in oil prices to $130 a barrel, but prices returned to their pre-invasion levels of $95 by mid-August.

These relatively quick reversals of oil price spikes were largely thanks to the ample spare production capacity available at the time and the fact that the rapid oil price increase curbed demand, says Tamas Varga, an analyst at oil brokerage PVM.

Global oil markets were also rocked during the 1973 Arab oil embargo and after the 1979 revolution in Iran, when strikes on the country’s oilfields severely disrupted production. But those did not involve the blocking of Hormuz and were not met with a direct U.S. military response.

OPEC spare oil production capacity

SPARE CAPACITY

The current global oil market certainly has spare capacity. OPEC+, an alliance of producing nations, today holds around 5.7 million barrels per day in excess capacity, of which Saudi Arabia and the United Arab Emirates hold 4.2 million bpd.

The concern today is that the vast majority of the oil from Saudi Arabia and the UAE is shipped via the Strait of Hormuz.

The two Gulf powers could bypass the strait by oil pipelines, however. Saudi Arabia, the world’s top oil exporter, producing around 9 million bpd, has a crude pipeline that runs from the Abqaiq oilfield on the Gulf coast in the east to the Red Sea port city of Yanbu in the west. The pipeline has capacity of 5 million bpd and was able to temporarily expand its capacity by another 2 million bpd in 2019.

The UAE, which produced 3.3 million bpd of crude oil in April, has a 1.5 million bpd pipeline linking its onshore oilfields to the Fujairah oil terminal that is east of the Strait of Hormuz.

But this western route could be exposed to attacks from the Iran-backed Houthis in Yemen, who have severely disrupted shipping through the Suez Canal in recent years. Additionally, Iraq, Kuwait and Qatar currently have no clear alternatives to the strait.

It is possible that Iran will choose not to take the dramatic step of blocking the strait in part because doing so would disrupt its own oil exports. Tehran may also consider any further escalation fruitless in light of U.S. involvement and will instead try to downplay the importance of the U.S. strikes and come back to nuclear negotiations.

In the meantime, spooked energy markets, fearing further escalation, are apt to respond to the U.S. strikes with a sharp jump in crude prices. But even in a doomsday scenario where the Strait of Hormuz is blocked, history suggests markets should not expect any supply shock to be persistent.

(This June 22 story has been corrected to clarify that the width of the Strait of Hormuz at its narrowest point is 34 km (21 miles), not 55 km (34 miles), in paragraph 8)

Ron Bousso; Editing by Helen Popper and David Evans

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Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.

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India oil crisis Iran: Iran’s Parliament has approved the closing of the Strait of Hormuz, though the final decision will be taken by the Supreme National Security Council, Iran’s Press TV reported on Sunday (June 22).

After the US struck three Iranian military sites, all eyes are now on Iran’s potential retaliation. In the range of options Iran has, possibly the most discussed is the threat to block the Strait of Hormuz. So far, most experts had agreed that Iran would not go that far. America’s actions on Sunday seemed to have changed that.

Iran’s foreign minister Seyed Abbas Aragchi, when asked by reporters about Hormuz, said simply that “a variety of options are available with Iran”.

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US Secretary of State Marco Rubio called on China to urge Iran to not shut down the Strait. Rubio said on Fox News, “I encourage the Chinese government in Beijing to call them about that, because they heavily depend on the Straits of Hormuz for their oil. If they do that, it will be another terrible mistake. It’s an economic suicide for them if they do it.”

What makes blocking the Strait of Hormuz such a potent threat? We break down the history, geography and economics, in four points.

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What is the Strait of Hormuz?

A strait is a narrow water body connecting two larger bodies of water. The two water bodies that the Strait of Hormuz connects are the Persian Gulf and the Gulf of Oman, which further flows out into the Arabian Sea. Thus, countries around the Persian Gulf like Iran, Saudi Arabia, and UAE, which happen to be major oil producers, depend upon the Strait of Hormuz to access the open seas. The Strait is in the territorial waters of Iran and Oman, and accounts for a big bulk of the world’s oil trade.

The Strait of Hormuz connects the Persian Gulf and the Gulf of Oman. (Photo: Wikimedia Commons) The Strait of Hormuz connects the Persian Gulf and the Gulf of Oman. (Photo: Wikimedia Commons)

The Strait is not very wide. It is just 33 km at its narrowest point, while the width of the shipping lane in the to and fro directions is only 3 km. This makes it easy to block the Strait, or attack the ships passing through.

Why is the Strait of Hormuz so important?

Oil. According to the US Energy Information Administration (EIA), “Flows through the Strait of Hormuz in 2024 and the first quarter of 2025 made up more than one-quarter of total global seaborne oil trade and about one-fifth of global oil and petroleum product consumption. In addition, around one-fifth of global liquefied natural gas trade also transited the Strait of Hormuz in 2024, primarily from Qatar.”

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Because of its geographic location, there is no sea route alternative to the Strait of Hormuz. So if the passage of ships through the strait were to be disrupted, it would have ramifications for oil and LNG trade worldwide, and prices would shoot up. Any fluctuation in oil prices has a trickle-down effect on the prices of many other goods and commodities.

The alternatives to the Strait of Hormuz involve transporting oil overland to ports on the Red Sea or on the Gulf of Oman. The EIA states that Saudi Arabia’s Aramco “operates the 5 million barrels per day East-West crude oil pipeline, which runs from the Abqaiq oil processing centre near the Persian Gulf to the Yanbu port on the Red Sea”, while the UAE operates a “1.8 million-b/d pipeline linking onshore oil fields to the Fujairah export terminal in the Gulf of Oman.” For comparison, the flow through the Strait of Hormuz in 2024 was 20 million barrels per day.

Also, if a danger is perceived in the Strait of Hormuz region, insurances and security measures will go up, making shipping more expensive for all parties involved.

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How likely is Iran to block the Strait of Hormuz?

Blocking or disrupting the Strait of Hormuz can mean laying mines in the sea, attacking passing ships with missiles and bombs, detaining ships, or carrying out cyberattacks on the vessels.

Iran has never blocked the Strait, amid any war or conflict. In the 1980s, during the Iran-Iraq war, both nations attacked ships passing through the strait, but did not stop traffic.

This is because Iran depends on the strait for its own trade too, and disrupting it will hurt both itself and its friends. Iran’s neighbours, including the powerful Saudi Arabia, are slowly improving ties with it, and Tehran would not want to alienate them.

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Also, because of Western sanctions, Iran has few customers for its oil, which China thus buys in bulk at heavy discounts. A disruption in the strait will disrupt Iran ally China’s energy needs.

A major factor staying Iran’s hand so far had been that disturbing global trade would be one sure way to get the US directly involved militarily. But since the US has now already involved itself militarily, this deterrence is to a degree spent.

The US has its 5th Fleet stationed in Bahrain, and can respond quickly to Iran’s activities in the region. However, by the time ship movement is restored to normal, much chaos would already have been caused.

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How will India be affected if Strait of Hormuz is blocked?

The EIA estimates “84% of the crude oil and condensate and 83% of the liquefied natural gas that moved through the Strait of Hormuz went to Asian markets in 2024. China, India, Japan, and South Korea were the top destinations for crude oil moving through the Strait of Hormuz to Asia, accounting for a combined 69% of all Hormuz crude oil and condensate flows in 2024.”

So, India will be affected. India also buys oil from Russia, the US, Africa, and Latin America, so it is not that it won’t be able to get enough oil and gas. The problem will be about the price fluctuation.

Also, because China buys much of its oil from Iran, a long disruption here could force Beijing to turn to other sellers, further complicating the price question.