The Strait of Hormuz is crucial to global oil supplies. Iran is trying to hijack ships there. The USA has increased its military presence in the region.
While Israel’s army is apparently preparing a ground offensive in the Gaza Strip following the Hamas attack, fears of an escalation in the Middle East are growing. Iran is at the center. Its mullahs’ regime is a declared opponent of Israel and supports two terrorist organizations whose goal is the destruction of Israel – Hamas and the highly armed Hezbollah, which is rooted in its northern neighbor Lebanon.
Against this background, Iran has another effective weapon: its direct location on the Strait of Hormuz. She can use the regime to drive up the price of oil even further – and thus hit the global economy severely.
This important waterway separates the Persian Gulf from the Arabian Sea. They ship most of the Middle East’s crude oil and natural gas. Around a fifth of the oil traded worldwide is transported via this route. The Strait of Hormuz is shaped like an inverted V, with Iran to the north and the United Arab Emirates and Oman to the south. It is only around 50 kilometers wide at its narrowest point, with the channels only being around 3 kilometers wide in each direction.
That and a shallow depth allow Iran to block shipping traffic with sea mines. Due to their proximity to the mainland, tankers can be attacked by land-based missiles or attacked by fast patrol boats. In recent months, Iran has seized or failed to seize many merchant ships in the Persian Gulf – thereby contributing to the high price of oil.
Significant connection
There are hardly any alternatives to the route. Kuwait, Qatar and Bahrain ship all of their production via the Strait of Hormuz. 90 percent of Iraq’s oil exports go through the strait. The United Arab Emirates can at least partially circumvent them by sending 1.5 million barrels per day via a pipeline from its oil fields to the port of Fujairah on the Gulf of Oman.
Saudi Arabia – the world’s largest oil exporter – uses the route to transport the lion’s share of its oil. The country can divert a large part of it through a pipeline across the desert to an export terminal on the Red Sea. However, this connection is far from sufficient to take over all crude oil exports.
However, a complete blockade of the strait by Iran would affect the country itself. Because its crude oil is shipped by road, which would then no longer be possible. Because of Western sanctions, Iran’s oil exports are severely restricted. But the mullahs’ regime still finds ways to sell oil – especially to China. According to the US Census Bureau Energy Information Administration, Iran was the world’s eighth-largest oil producer last year.
In addition, the Iranian Navy is no match for the US Fifth Fleet operating in the region and other forces in the region. But the country is in a position to disrupt shipping traffic and drive up the price of oil – simply because the attacks noticeably increase the insurance rates for the ships.
Iran disrupts shipping traffic
The US magazine “Foreign Policy” has described how Iran is proceeding. In the early morning hours of July 5th, the US Navy received a distress call from an oil tanker passing through the Strait of Hormuz. The “TRF Moss” reported that an Iranian naval ship was quickly approaching and apparently planned to board and hijack the tanker. The Navy immediately sent a small task force to prevent this. These included the destroyer USS McFaul, a reconnaissance aircraft and a Reaper drone. The Iranian ship withdrew.
A few hours later there was another incident. The USS McFaul rushed to the tanker Richmond Voyager after receiving a distress call. Accordingly, the Iranian navy tried to stop this ship too and fired volleys at the bow of the tanker. The destroyer managed to drive away the attackers.
The mood on the oil market is currently tense. Prices are still a bit away from the highs they reached at the end of September. However, the trend has recently been upwards. A barrel of the North Sea Brent variety currently costs around $90, a barrel of the US reference variety WTI costs just under $87. What role Iran will play is seen as crucial on the oil market. Expressed in numbers: Folker Hellmeyer, chief economist at Netfonds Group, told ntv that if there was an escalation, prices could shoot up to $150 per barrel.