LONDON

Global markets are closely monitoring the Strait of Hormuz, a vital corridor for oil and liquefied natural gas (LNG), amid fears that a widening conflict between Israel and Iran could disrupt traffic through the narrow waterway.

The Strait of Hormuz, positioned in between the Persian Gulf and the Gulf of Oman, is a narrow but critical sea route that approximately one-third of global oil trade, accounting for 17 million to 20 million barrels of crude oil and condensate passes through daily.

Around 70% of oil volume goes to Asia via this route, with China, Japan, India, South Korea, Singapore, Thailand, Pakistan, and the Philippines among the largest recipients, according to the International Energy Agency.

The route is also essential for LNG exports, especially from Qatar and the United Arab Emirates, which account for 20% of global LNG trade. Europe is a key destination for LNG that transits through Hormuz.

While Iran has previously threatened to close the strait in response to geopolitical tensions, it has yet to act on such threats. However, the prospect of a broader regional conflict following Israel’s airstrikes on Iran has renewed concerns over possible supply disruptions and rising energy prices.

- Strait of Hormuz’ closure to be ‘absolute nightmare’

The UK Maritime Trade Organization said on Wednesday that the rising tensions in the region could escalate the military activity in critical waterways and affect maritime transport, while the Baltic and International Maritime Council also warned that any attack could directly impact maritime transport.

Some analysts say that Iran has a lot at stake should they close the route, as almost all the country’s oil exports and a large portion of China’s oil imports comes through the Strait of Hormuz.

Arne Lohmann Rasmussen, chief analyst and head of research at Global Risk Management, said that the closure of the Strait of Hormuz would be an “absolute nightmare” for the oil market.

“If Iran blocks this narrow chokepoint, it could affect up to 20% of global oil flows,” he said. “A closure would likely send oil prices above $100.”

- Oil prices spike

Following Israel’s attacks early Friday on Tehran, the Natanz nuclear facility in Isfahan, and cities including Lorestan and Kermanshah, oil prices surged more than 7%, hitting $73.58, a nearly five-month high.

Senior Iranian military officials, including Iran’s Revolutionary Guard Corps Commander-in-Chief Hossein Salami and Maj. Gen. Mohammad Bagheri, were reportedly killed in the strikes.

Israel also reportedly struck residential areas in Tehran, resulting in numerous civilian deaths. Several nuclear scientists were also killed in the attack on the Natanz nuclear facility in Isfahan.