- The mid-June 2025 escalation between Israel and Iran has renewed fears of disruptions in the Strait of Hormuz, a vital chokepoint for global oil and LNG flows.
- A potential closure would harm Iran’s own exports and its allies like China and Qatar, while causing a sharp rise in freight costs and insurance premiums for maritime traffic.
- Even without full closure, strategic threats are already unsettling global energy logistics and inflating shipping and spot market prices across Asia.
The spike in regional tensions in mid-June 2025—marked by Israeli airstrikes on Iranian energy and military assets and retaliatory missile and drone attacks by Iran—has intensified global concerns over the Strait of Hormuz. This narrow waterway, through which around 20 million barrels per day of crude oil flow, accounts for nearly 30% of the world’s seaborne oil trade and 20% of total global petroleum liquids. Given its tight 21-mile-wide navigation channel, any significant disruption could send shockwaves through energy markets and global supply chains, according to Breakwave Advisors.
Iran’s Dilemma: Strategic Posturing vs Economic Reality
While Iran has raised the specter of closing the Strait, doing so would not only weaponize a critical chokepoint but also undermine its economy. Tehran exports more than 1.6 million barrels per day—primarily to China—through Hormuz, and over 80% of its general cargo volume moves via ports reliant on the strait. Any closure would be self-destructive unless Tehran relies on alternate and far less capable routes like the Gachsaran-Jask pipeline, which only carries about 300,000 barrels per day.
Complexities Involving Iran’s Key Allies
Geopolitical complications are deepened by the fact that the countries most vulnerable to a disruption—Qatar and China—maintain strong or pragmatic relationships with Iran. China, a top customer of Iranian oil, relies heavily on Gulf energy exports and received over 25% of its 2024 LNG imports through the Strait, with Qatar contributing nearly 24% of that volume. Qatar, now China’s top LNG supplier after overtaking Australia, sends nearly all of its 81 million tons of annual LNG exports through Hormuz. A closure would severely hit China’s energy security and inflate both spot and long-term LNG prices, especially as the nation has tied itself to long-term contracts with Gulf producers.
China’s Crude and LNG Exposure
As the world’s leading crude oil importer at roughly 11.1 million barrels per day in 2024, China draws about a third of its imports from Gulf nations such as Saudi Arabia, Iraq, and Oman. A halt or disruption in traffic through Hormuz would force China to turn to more expensive and less reliable spot markets or shift to longer, less efficient routes, complicating refinery operations and potentially slowing industrial throughput.
Shipping Market Impacts and Risk Response
Even in the absence of a full blockade, the maritime sector is already feeling the strain. Insurance premiums and freight rates are increasing. Tanker operator Frontline has paused new bookings through Hormuz and is sending ships under naval escort. Japanese firm Mitsui-OSK Lines continues Gulf operations but under strict risk management. Meanwhile, recent accidents, such as a tanker collision near Oman, have prompted emergency tug and evacuation deployments, adding to a growing sense of risk. These factors are pushing shipping and insurance costs upward, with expenses ultimately passed along to global energy consumers.
Risk of Closure vs Impact of Threat
While a total closure of the Strait of Hormuz remains unlikely due to the immense economic damage it would inflict on Iran, the mere threat has already unsettled global trade flows. The impact is most acutely felt by Qatar, China, and other Gulf-reliant nations that are closely tied to Iranian trade routes. Freight markets are tightening, costs are climbing, and energy prices are rising—all triggered by strategic brinkmanship in one of the world’s most vital maritime corridors. The situation underlines how geopolitical signaling alone can destabilize shipping routes and amplify risks in the global energy system.
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Source: Breakwave Advisors
