Amid escalating tension in the Middle East. Iran on Friday said it has not yet closed the Strait of Hormuz and has no intention to do it until further notice. In a statement, Dr Saeed Khatibzadeh, Iran’s Deputy Minister of Foreign Affairs, said, “We have not yet closed the Strait of Hormuz. If we are going to close it, we are going to announce it…It has not been closed by us. We have no intention to do it until further notice.”
The joint attack launched by the United States and Israel on Iran began on February 27 and has sparked a fast-moving conflict that could expand across the Middle East. Iran’s response has already included strikes on US bases in surrounding countries as far away as Qatar and Oman, and reports claimed it closed the Strait of Hormuz, going so far as threatening to set ships on fire if they enter the strait.
Know all about Strait of Hormuz
The Strait of Hormuz is a 55-kilometre-wide narrows between Iran and Oman, separating the Persian Gulf from the Arabian Sea. It is a particularly important piece of global real estate in terms of the energy sector and one of the busiest and most strategically significant shipping routes in the world.
The closure has disrupted oil and gas shipments from the region and rattled markets around the world. Overall maritime traffic through the strait has dropped by 70 per cent since the closure, with 18 loaded and 37 unloaded tankers remaining in the Persian Gulf.
About 13 million barrels of oil per day normally move through these waters – about 31 per cent of global oil shipments. Blocking passage through the strait will certainly affect world oil prices. Even a short-lived closure of parts of the strait in February 2025 led to a six per cent jump in the price of oil.
Why the Strait of Hormuz matters?
Closure of the strait affects major ports belonging to Iraq, Kuwait, Saudi Arabia and the United Arab Emirates, as well as Iran itself. For several of these countries, the strait is the primary route through which oil reaches global markets.
On March 2, Brent Crude – the global benchmark – reached about USD 79 per barrel before declining slightly, about eight per cent higher than last week’s prices. West Texas Intermediate, the North American benchmark, reached USD 71 per barrel – a six per cent increase.
Those price movements are already being felt at the pump. Gasoline prices in both Canada and the US have begun to rise, although not as dramatically as commodity prices. Increases could persist as long as the conflict continues to disrupt tanker traffic through the Strait of Hormuz.
Throughout the last 50 years, oil price increases have often presaged an upcoming economic downturn. Some events, such as the first and second oil crises in the 1970s and early ’80s, led to structural changes in global economies.
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