Huileng Tan,Pete Syme
5 min read
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US strikes on Iran's nuclear sites are raising fears of Tehran's retaliation and oil disruption.
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For years, Tehran has threatened to close the Strait of Hormuz, a key energy shipping route to its south.
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A blockade would hit Asian markets hardest, with global high prices also affecting the US.
Global investors are on alert about a 90-mile sea passage in the Middle East, fearing that any block of the Strait of Hormuz could derail global shipping and oil.
Tensions in the Middle East escalated sharply after the US struck Iran's nuclear facilities on Sunday, prompting fears of retaliation from Tehran. Beyond concerns about defense and security, markets are concerned about the fallout for oil prices and the global economy should Iran block shipping in the Strait of Hormuz — a threat Tehran has repeated for years.
"If Iran chooses to blockade the Strait of Hormuz, it'd be categorically negative," Kyle Rodda, a senior financial markets analyst at Capital.com, told Business Insider.
"In the worst-case scenario, it would be incredibly impactful: higher fuel prices, higher inflation, slower growth, and interest rates higher than where they'd otherwise be," Rodda said.
One of the most geopolitically sensitive maritime routes, the Strait of Hormuz is just 21 miles across at its narrowest point. It connects the Persian Gulf to the Indian Ocean, with Iran to its north and the United Arab Emirates and Oman to its south.
According to the US's Energy Information Administration, the Hormuz is one of the world's busiest shipping lanes, carrying about 20 million barrels of oil a day.
Most energy shipments through the Strait of Hormuz have no other means of exiting the Persian Gulf, the starting sea point for major oil producers like Saudi Arabia to export their energy to the rest of the world.
About a quarter of seaborne oil and a fifth of global liquified natural gas trade moves through the Hormuz, so any disruption to shipping would hit the energy markets hard.
"The bombing of Iranian nuclear facilities by the US over the weekend increased supply risks significantly for the oil and LNG market," wrote Warren Patterson, the head of commodities strategy at ING, on Monday.
Iran doesn't have the legal authority to shut down marine traffic in the Hormuz. But it could disrupt the movement of vessels by other means, for example by damaging oil and shipping infrastructure.
