Strait of Hormuz, Why It Matters

The Strait of Hormuz is a bending narrow body of water linking the Persian Gulf with the Gulf of Oman leading out to the Arabian Sea. It separates Iran from the Arabian peninsula. It is of strategic and economic importance as a waterway through which sea traffic, to and from the oil-rich countries of the gulf, must pass. But where is it?

On one side of the Arabian Peninsula is the Arabian Sea, which is connected to the Mediterranean by the red Sea. It runs between the Arabian peninsula and the east coast of the Continent of Africa, joining the Mediterranean Sea through the Suez Canal. On the other side of the peninsula, the Arabian Sea runs into the Gulf of Oman, which is connected to the Persian Gulf. Between these two Gulfs is this very narrow stretch of water we call the Strait of Hormuz.

The Strait is bounded on either side by the countries of Iran, Oman and the United Arab Emirates. The Strait of Hormuz helps transport immense amounts of oil per day on some of the biggest ships on earth. Most people don’t even know how narrow the Strait is and how large is the volume of oil that is transported through it. The Strait is the world’s most important choke point for the transport of oil.

Just to get an idea of the scale of the amount of oil and other energy products transiting the Strait, in 2018, the average number of barrels of oil and other petroleum liquids passing through the Strait, was approximately 21 million barrels per day. Each barrel holds approximately 42 gallons U.S., a measurement that became the industry standard in the 1800s from the wooden whiskey barrels used for early transport. That equates to 832,000,000 million gallons!

Approximately 21% of the entire world daily petrol consumption, or 1/3 of all of the sea transited oil on earth, travels through the Strait, as well as 1/4 of all of the traded natural gas (LNG). The Strait of Hormuz is only approximately 24 miles wide at its narrowest point, because of this, ships transiting the Strait must follow strict shipping lanes. Despite its narrow width, the Strait is deep enough to accommodate the largest ships on earth – the very large and ultra-large crude carriers.

Large ships exiting the Persian Gulf via the Strait, have to participate in a carefully choreograph dance. The first shipping lanes start in the territorial borders of Iran, then passes between three islands which are currently administered by Iran but claimed by the UAE.  Next, the super tankers must pass into Omani territorial waters to transit the narrow shipping lanes.

In 2018, about 76% of the crude oil that sailed through the Strait, headed the other direction away from the Suez Canal on the eastern side of the Arabian peninsula to Asia, and most of that went to only five countries: China, India, Japan, Singapore, and South Korea. Furthermore, to reach the large markets in East Asia, oil tankers usually have to traverse another oil choke point, the “Strait of Malacca,” which is another story all in itself.

To summarize, the Strait of Hormuz is critically important to the world’s economies and it is located in an area that falls within the territorial waters of several countries, this means that any incidents within the Strait, has the potential to increase tensions between boundary countries, threaten the passage of shipping, or worse , start an armed conflict between neighboring countries, as we are seeing today. This threatens the stability of oil production, transport, storage and the global oil trade.

We can imagine just have damaging any disruption to the flow of oil through the Strait of Hormuz would be to countries whose economies are reliant on selling oil and those countries whose economies are reliant on buying the oil.

Of all the oil producing Gulf countries, only Iran, has conceived a strategic defense plan to disrupt the flow of oil through its territorial waters and therefore, raise the cost of oil in order to protect itself from any military intervention against them.  Something that is inconceivable to their neighboring Sunni Gulf countries, whose entire economies, infrastructure and investments, are wholly dependent upon oil revenues. But Shia Iran is indeed, an odd duck.