Why the Strait of Hormuz is so important?

The strait of Hormuz is only a hundred and sixty-seven kilometers long and approximately 39 kilometers wide at its narrowest point. It seems a bit insignificant narrow stretch of waterway and yet it’s one of the most contentious places on earth often refer to as “the jugular of the global economy”. To be geographically correct It’s located between the Arabian Peninsula and Iran.

So why exactly is this Strait such a political flashpoint?

It’s one of the busiest waterways for the world’s oil industry for starters.

Most of the ships sailing through carrying oil and gas from all of the oil and gas producing countries to the rest of the world including key markets in Asia, Europe, North America and beyond.

The above map on the marine traffic website shows naval traffic around the world in real-time and as you can see the Strait of Hormuz is a major choke point for marine traffic and it’s a small strip of water that can be controlled blocked or otherwise disrupted as a deliberate political maneuver.

The actual shipping lanes within the strait span only a mere 3.21 kilometers but an average of around 21 million barrels of oil passed through the shipping lanes every single day that’s about twenty percent of all global Seaborne crude. Saudi Arabia, Iran, the UAE, Bahrain, Kuwait, and Iraq export most of their crude via the Strait with the largest exports coming from Saudi Arabia and Iraq, while Qatar the world’s largest liquefied natural gas exporter sends almost all of its LNG through the Strait so it’s no wonder tensions flare up from time to time.

In the area on one side of the strait are the UAE and Oman both of which have strong ties to the United States and Saudi Arabia while on the other side is their common enemy Iran. Both Iran and Oman share territorial rights over the Strait and Iran has used the Strait as political leverage threatening at times to close it often as a reaction to US sanctions against its economy, but straight related politics is nothing new.  The 1980s saw what was called the tanker wars that were a main feature of the Iran-Iraq war during that time the warring sides tried to sink each other’s energy exports. Iran placed sea mines in the paths of ships and Iraq fired missiles at them the U.S. took to escorting its ships through the contentious waters.

The Strait has never actually been closed and it’s highly unlikely that Iran will shut it down completely because its economy also heavily depends on oil shipments through the Strait.

The Strait has also seen transgression by smugglers in its waters most recently the Strait came under the spotlight once again when two tankers were attacked in June of 2019 the price of Brent crude jumped two whole dollars. The U.S. blamed Iran for the attacks which Tehran categorically denied.

A few days later Iran shot down a U.S. drone flying in its airspace than in July 2019 Iran’s detention of two British owned oil tankers escalated tensions with London and Washington at the CenterPoint. The US has recently been putting together a new coalition sending up to 8,000 extra troops to the region along with warships planes and other missile defense systems but tensions were already on the rise after U.S. President Donald Trump unilaterally withdrew the U.S. from the Iran nuclear deal and imposed crippling sanctions on Iran the deal was reached in Vienna in 2015 under the Obama administration and included Iran the five members of the UN Security Council and Germany there’s a reason why the Straits called the jugular of the global economy and tensions around it could cause huge implications.

A brief about the Strait of Hormuz

If you consider the Arabian Peninsula. On one side of the peninsula, the Arabian sea is connected to the Mediterranean by the Red Sea, which runs between the peninsula and the continent of Africa and joins the Mediterranean Sea here, 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 – 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 21 million barrels of oil per day, on some of the biggest ships on earth.

The Strait of Hormuz is the world’s most important chokepoint for the transport oil. Just to get an idea of the scale of the amount of oil and other energy products transiting the strait, here are some quick maths: In 2018, the average number of barrels of oil and other petrol liquids passing through the strait was about 21 million barrels per day.

Each barrel is about 159 liters, which equates to a total of over 3 billion liters, or more than 1300 Olympic swimming pools of liquid per day. This is about 21% of the entire world’s daily petrol consumption. One-third of all the sea-transited oil on earth travels through the strait, as well as one-quarter of all of the traded natural gas.

The Strait of Hormuz is only about 39km wide at its narrowest point. Because of this, ships transiting the strait must stick to strict shipping lanes. Despite its narrow width, the Strait of Hormuz is deep enough to accommodate the largest ships on earth – the epically named Very-Large and Ultra-Large Crude Carriers. Large ships exiting the Persian Gulf via the Strait of Hormuz have to take part in maneuvers to pass each other. The first shipping lane starts in the territorial waters of Iran. It then passes between 3 islands which are currently administered by Iran but claimed by the UAE. Next, these supertankers must pass into Omani territorial waters to transit the narrowest shipping lanes in the narrowest part of the strait. Once through the strait, there are more shipping lanes in the Gulf of Oman that can take ships back into Iranian territorial waters.

We’ve talked about how the Persian Gulf is connected to the Mediterranean Sea via the Strait of Hormuz, but actually in 2018 about 76% of the crude oil transmitted through the Strait headed the other direction – to Asia, and most of that went to only 5 countries – China, India, Japan, Singapore, and South Korea. To get to the large markets in East Asia, oil tankers usually have to traverse another oil chokepoint, the Strait of Malacca – which we might talk about in another article.

So the strait of Hormuz is narrow – so narrow that it falls within the territorial waters of the boundary countries. This means that any incidents within the strait have the potential to shut down transit, or at worst to spark conflict between countries.

Now you know just how important the Strait of Hormuz is to the global oil trade, we can imagine just how damaging any disruption to the flow oil through the strait would be to countries reliant on receiving the oil, and on those countries reliant on the income from selling oil. So, aside from the oil-buying countries trying to reduce their reliance on foreign oil – what else has the oil-producing countries done to try and mitigate any threats to the stability of the Strait of Hormuz as a shipping route? Well, only Saudi Arabia and the UAE can bypass the Strait of Hormuz by shipping outside of the Persian Gulf and have pipelines to get the oil to those ports. Remember that 21 million barrels per day transited the Strait of Hormuz in 2018. Saudi Arabia has the East-West pipeline than can transport up to 5 million barrels per day to its port on the Red Sea, although in 2018 this pipeline was only used to transport 2 million barrels per day. It also has a natural gas pipeline, which can transport the equivalent of 300000 barrels per day. The UAE has the Abu Dhabi Crude oil pipeline, to transport oil directly to the Gulf of Oman which can pump up to 1.5 million barrels per day, but was only used for 600000 barrels per day last year. Other pipelines exist, but most are relatively small and cross international borders – so have fallen into disuse due to recent conflict or political disagreements between countries.

So what does the future hold for the Strait of Hormuz? Well, that is a very tricky question – and one that probably no one can answer. As we’ve discovered, the importance of the strait is amplified by the geography of the region, including a lack of viable alternative shipping routes, but it’s also important to acknowledge that the strait is fully integrated into the territorial waters of various countries meaning that the politics of the region affects the stability of the strait as a shipping route. The Strait of Hormuz will likely continue to be one of the most important shipping routes in the world, especially if the global hunger for oil continues.