Critical Oil Transit Route Under Threat
Iran Parliament Votes to Close Strait of Hormuz, a crucial waterway that handles approximately 20% of the world’s daily oil supply. This decision comes after recent US strikes on Iranian nuclear sites. Closing the Strait could disrupt oil shipments worth approximately $1 billion per day, potentially leading to a significant increase in oil prices. This action marks a substantial increase in tensions in the Middle East.
The final decision regarding the closure of the Strait rests with Iran’s Supreme National Security Council and its leader, Ayatollah Ali Khamenei. They need to make their decision by tonight, as reported by Iran’s state-run Press TV. Even though the Parliament has already voted in favor of closing the Strait, Revolutionary Guards Commander Ismail Kowsari stated on Sunday that the Supreme National Security Council will make the ultimate decision.
US Military Operation “Midnight Hammer”
On Saturday night, President Trump announced that the United States had carried out airstrikes on three nuclear facilities in Iran. This action follows a conflict that began two weeks ago with Israel. The strikes, named “Operation Midnight Hammer,” specifically targeted nuclear sites in the cities of Natanz, Isfahan, and Fordow, with Fordow being situated inside a mountain.
U.S. officials announced that they targeted Iran’s major nuclear sites, using 14 deep-penetrating bombs, more than 25 Tomahawk missiles, and over 125 military aircraft. Seven B-2 stealth bombers dropped 14 bombs on two nuclear facilities, including Fordow, while a third site was struck with submarine-launched cruise missiles.
The MOP bombs used in the recent attacks had never been used in battle before Saturday. President Donald Trump announced that the targeted sites were destroyed during the operation, which involved a total of 125 aircraft and took just 25 minutes to finish.
Strategic Importance of the Strait of Hormuz
The Strait that connects the Gulf of Oman with the Persian Gulf is one of the most essential waterways in the world. At its narrowest point, it’s only about 20 miles wide, making it easy to block or attack. This narrow passage has two shipping lanes, each 2 miles wide, which makes them quite vulnerable.
Most of the oil exported by major oil-producing countries in the region—such as Iran, Iraq, Kuwait, Qatar, Saudi Arabia, and the United Arab Emirates—passes through this strait. Around 20 percent of all the oil traded globally goes through here. Experts warn that if Iran decided to shut off access to this strait, it could cause oil prices to shoot up by 30 to 50 percent almost instantly. Gas prices might also increase by as much as $5 per gallon.
International Response and Warnings
US Secretary of State Marco Rubio urged China on Sunday to convince Iran not to block the Strait of Hormuz, a crucial waterway for oil transportation. Rubio emphasized that Iran relies heavily on this strait for its oil shipments.
He warned that if Iran were to close the Strait, it would be a disastrous move for their economy. “It would be a big mistake, like economic suicide for them,” Rubio said, adding that the situation could also have serious economic consequences for other countries around the world.
Vice President JD Vance echoed these concerns, stating that shutting down the strait would be incredibly damaging for Iran. He pointed out that Iran’s economy largely depends on this route. Vance said, “If they choose to do this, it would be their own decision to harm their economy and disrupt global trade.”
Iranian Escalation and Threats
Iranian Foreign Minister Abbas Araghchi has accused the United States of sabotaging diplomatic efforts aimed at stopping the fighting with Israel. He made this statement after the U.S. joined in airstrikes against Iran late Saturday night, warning that these actions could lead to serious, long-lasting repercussions.”
In response to the U.S. attacks on its nuclear facilities, Esmail Kosari, a commander in Iran’s Revolutionary Guards, indicated that Iran is prepared to escalate its response whenever it sees fit. When asked whether Iran would close off a key waterway, Araghchi avoided giving a direct answer but mentioned that Iran has various options it could consider
Meanwhile, President Donald Trump took to social media on Saturday evening to send a strong message, stating that any retaliation from Iran against the United States would be met with an overwhelming military response. He concluded his message by signing off as the President.
Market Response and Expert Analysis
Spencer Hakimian, the founder of Tolou Capital Management, shared an update on X on Saturday, saying that nearly 50 large oil tankers are rushing to leave the Strait of Hormuz. This suggests that the oil industry may anticipate a blockade in the area soon.
According to ClearView Energy Partners, if there are no diplomatic agreements with Tehran, the price of Brent crude oil could start off higher than its closing price of $77.01 per barrel on Friday.
However, some experts are skeptical about whether Iran will follow through on any threats. Analysts from the Eurasia Group believe that attempts by Iran to close the Strait or attack oil facilities in the Persian Gulf are unlikely. They point out that the US has established a strong military presence in the Gulf region, and any Iranian action against the strait would likely lead to a significant military response from the US.
Historical Context and Military Realities
Iran has no legal right to block ships in the Strait of Hormuz, and any attempts to do so would likely face a strong response from the US and other Western navies patrolling the area.
The last time Iran disrupted traffic in the Persian Gulf was in April of last year when it seized a container ship linked to Israel, claiming it had broken maritime rules. During the Iran-Iraq War in the 1980s, Iran targeted oil tankers and facilities, which didn’t entirely block the Strait but did lead to higher shipping insurance costs and delays in maritime traffic.
Implications and Next Steps
The current situation marks the first time that the ongoing conflict between Israel and Iran could significantly impact global oil supplies. For any final steps towards closing the Strait of Hormuz—a crucial waterway for oil transportation—Iran’s leader, Khamenei, must give his approval. This could happen as soon as Sunday, following a decision made by the Iranian Parliament.
When markets open tonight, investors’ reactions will provide an early indication of how seriously they view this threat. If the Strait were to be closed, it could lead to a sharp increase in oil prices, which would likely affect gas prices for consumers in the United States.