The Strait of Hormuz, located between Oman and Iran, connects the Persian Gulf with the Gulf of Oman and the Arabian Sea. In 2024, oil flow through the Strait averaged 20 million barrels per day, or approximately 20% of global petroleum liquids consumption, and remained at that level through the first quarter of 2025. The strait is deep enough and wide enough to handle the world’s largest oil tankers. Saudi Arabia is the Strait’s biggest exporter, accounting for nearly 40% of the oil exports that moved through the Strait last year. Iraq is the second biggest exporter, followed by the United Arab Emirates, Kuwait, and Iran. China is the top destination for oil transported through the strait, as it is the world’s largest oil importer. More than 80% of oil exports through the strait end up in Asian markets. Besides China, other top importers are India, South Korea, and Japan. In addition to oil flows, around one-fifth of global liquefied natural gas (LNG) trade also transited the Strait of Hormuz in 2024, primarily from Qatar.
Shipping firms would be affected by a threat to close the Strait of Hormuz. Greece, one of the most significant sources of shipping companies, cautioned shipowners to “reassess passage” through the Strait of Hormuz. Some shipowners have paused transits through the Strait of Hormuz due to security concerns, which have also raised insurance costs by tens of thousands of dollars each day for shipments in the region.
As long as Iran’s oil infrastructure, which President Trump excluded from the attack on its nuclear sites, is not damaged, Iran is unlikely to close the Strait of Hormuz since it would affect Iran’s oil exports and its economy. President Trump, after a ceasefire was announced, posted on his social media platform Truth Social, “China can now continue to purchase Oil from Iran,” as China imports 90% of Iran’s oil. But U.S. sanctions will continue. The United States has sanctioned Chinese refineries, port operators, and other companies for importing Iranian crude as part of its broader “maximum pressure” campaign against Iran. To evade sanctions, some traders have transported Iranian oil to China and other destinations using companies based in Malaysia, India, and the United Arab Emirates.
As mentioned above, Saudi Arabia ships more oil and condensate through the Strait of Hormuz than any other country. Saudi Arabia and the UAE have pipelines that can bypass the Strait of Hormuz, which could help mitigate transit disruptions through the strait since the pipelines do not typically operate at full capacity. Iran has a pipeline and an export terminal on the Gulf of Oman that avoids the strait with a capacity of 300,000 barrels per day. Iran typically exports 1.7 million barrels of oil per day.
In 2024, the United States imported about 0.5 million barrels per day of oil and condensate from Persian Gulf countries through the Strait of Hormuz, accounting for about 7% of total U.S. oil and condensate imports and 2% of U.S. petroleum liquids consumption. That year, U.S. oil imports from countries in the Persian Gulf reached their lowest level in nearly 40 years, as both domestic production and imports from Canada had increased.
The ceasefire between Israel and Iran has pushed Brent oil prices below $70 per barrel, suggesting that the truce, if it holds, lessens the likelihood of severe supply disruptions, stabilizing prices near current levels while broader geopolitical clarity is determined. The diminished influence of geopolitical tensions in the Middle East on global oil prices has been evident during this war. OPEC’s share of global supply is now around 33% due to increased output from the United States and other non-OPEC countries, as well as OPEC’s strategies to maintain prices within a desired range. The greater production from non-OPEC countries, along with alternative export routes and ample storage, has resulted in Middle Eastern conflicts having a minor impact on global energy markets. Furthermore, JP Morgan found that none of the 11 major military conflicts involving Israel have had a lasting effect on oil prices, except for the Yom Kippur War. While regional conflicts often cause a temporary spike in oil prices due to fears of supply disruptions, prices eventually stabilize.
Conclusion
Market analysts have focused on the Strait of Hormuz as oil prices were expected to escalate if Iran were to close the strait due to its war with Israel and the U.S. strikes on its nuclear facilities. About 20% of global petroleum liquids consumption and around one-fifth of global liquefied natural gas trade transited the Strait of Hormuz in 2024. Saudi Arabia is the largest oil exporter that relies on the Strait, accounting for nearly 40%of the oil exports that pass through it. Following Saudi Arabia are Iraq, the United Arab Emirates, Kuwait, and Iran; Qatar is the largest exporter of LNG through the Strait. More than 80% of oil exports through the strait end up in Asian markets, with China being the top destination. While there was a temporary spike in oil prices due to fears of a supply disruption, oil prices have stabilized below $70 a barrel following the ceasefire between Israel and Iran. The ceasefire, if it holds, is lessening the likelihood of a severe supply disruption, stabilizing prices while broader geopolitical clarity is brought to the market.
