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Why the Strait of Hormuz is a Vital Oil Chokepoint
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Key Takeaways
- Roughly a fifth of global oil passes through the Strait of Hormuz, the second-largest oil chokepoint in the world.
- As tensions flare in the Middle East, any closure to the Strait of Hormuz could cause oil prices to spike to up to $130.
- The U.S. has imposed sanctions on Iranian oil, in efforts to exert pressure on the regime.
The total volume of oil passing through the Strait of Hormuz stands around a staggering $600 billion.
While a blockade of the strait is considered a distant possibility, its closure could ripple across global supply chain networks. In particular, Japan, China, and India would be impacted the most. Furthermore, a shock to oil prices would likely affecting production costs, in turn raising the price of consumer goods.
This graphic shows the most vital oil transit chokepoints, based on data from MUFG.
The Strait of Hormuz and Oil Trade Flows
Below, we show how the Strait of Hormuz sees the second-highest volume of oil passing through its corridor globally:
| Location | Million Barrels per Day in 2023 |
|---|---|
| Strait of Malacca | 23.7 |
| Strait of Hormuz | 20.9 |
| Suez Canal & SUMED Pipeline | 8.8 |
| Bab el-Mandeb | 8.6 |
| Cape of Good Hope | 6.0 |
| Danish Strait | 4.9 |
| Turkish Straits | 3.4 |
| Panama Canal | 2.1 |
In 2023, 20.9 million barrels of oil flowed through the Strait of Hormuz, which lies between Iran and Oman.
Iran largely controls this waterway, where 20% of global oil consumption is transported across this shipping route. In response to Israel-Iran conflicts, oil production surged by 950,000 barrels per day in June—largely driven by Saudi Arabian output.
While tensions have recently flared between Israel and Syria, it remains to be seen if conflict will resurface with Iran. Earlier in July, Israeli officials met with Trump to discuss certain scenarios that would justify a future attack on Iran—including the resumption of nuclear enrichment activities.
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