From Iranian resistance to oil blockade: Iran’s risk extends beyond the Strait of Hormuz

Oil and gas exports from the Persian Gulf are facing further disruptions as tensions between the United States and Iran escalate. For both sides, control of the Strait of Hormuz remains a key strategic point.

Guntram Wolff, senior fellow at the Bruegel research institute and economics lecturer at the Free University of Brussels, emphasizes that in recent months Iran has demonstrated the ability to control, or at least significantly hinder, movement through this strait.

According to Wolff, the months-long bombing campaign has not stripped Iran of its capacity to supervise the Strait of Hormuz, underscoring that for the US, achieving superiority in this area remains an unresolved problem.

This week, traffic in the strait was almost completely blocked again, as a result of Iranian attacks on tankers and the launch of drones and missiles at military bases in Bahrain, Kuwait, and Jordan.

For their part, the United States carried out additional airstrikes against Iran and reinstated the naval blockade on its ports. At the same time, Washington revoked a sanctions waiver that had allowed Tehran to freely trade its oil, which provided vital funds for the Iranian economy.

Before the war broke out on February 28, the Strait of Hormuz served as a free international sea lane, through which nearly 20% of global liquefied natural gas passed, according to data from the International Energy Agency.

Likewise, about one fifth of the world’s crude oil was transported from the Persian Gulf through this channel to the Arabian Sea and other destinations, with the vast majority of these shipments reaching markets in Asia.

Figures from the US Energy Information Administration show that in recent years, the daily average of this transit was around 20 million barrels of oil.

During the first quarter of the year, traffic through the Strait of Hormuz fell to about 14.6 million barrels per day, and since the escalation of the conflict, the decline has become even more pronounced.

A preliminary ceasefire agreement signed between the US and Iran on June 17 brought a temporary lull for commercial shipping, but it is no longer in effect. In recent weeks, the US military has struck hundreds of Iranian military targets.

Experts warn that new offensives against Iran could provoke a retaliatory response aimed at energy infrastructure in the Persian Gulf, including refineries, ports, and pipelines. Such a development would make the war extremely costly for the entire region and risk causing oil supply shortages on international markets.

The Greek maritime risk management company MARISKS warned, following the deterioration of the situation, that the fragile progress made by the June ceasefire had virtually evaporated and that the chances of further escalation remain very high.

Early in the conflict, there were reports that Iran was demanding 2 million dollars (around 1.7 million euros) for every vessel crossing this waterway. More recently, Iranian officials have instructed ships to follow a northern course, passing through Iranian territorial waters.

In parallel, the US Navy has undertaken to escort vessels along a southern corridor, near the coast of Oman, on the opposite side of the strait.

At this point, Iran, Iraq, Kuwait, Qatar, and Bahrain rely on the Strait of Hormuz to export the bulk of their oil reserves.

Although the sea route remains the most economical way to transport this resource, tankers have become the epicenter of a geopolitical confrontation for control of the strait, and this is pushing oil and gas exporters to seek other solutions.

Some countries, such as Saudi Arabia with the East-West Pipeline (Petroline) and the United Arab Emirates with the Abu Dhabi Crude Oil Pipeline, already have alternative export routes that bypass Hormuz. However, these pipelines have limited capacity, carrying a maximum of only 8.8 million barrels per day, the International Energy Agency notes.

As the existing infrastructure cannot replace the normal volumes transited through Hormuz, expanding the capacity of these pipelines appears to be one of the few alternatives. But such projects require many years and billions of dollars in costs.

Moreover, if these alternative routes aim for the Red Sea, they too risk becoming targets, affected by a possible expansion of the conflict beyond Hormuz.

Saudi Arabia’s East-West Pipeline connects Abqaiq on the eastern Gulf coast to the port of Yanbu on the Red Sea. But to reach the Arabian Sea and Asian markets, tankers departing from Yanbu are forced to sail through the Bab el-Mandeb Strait, another narrow strategic chokepoint, which is under threat from Yemen’s Houthi rebels, who are backed by Iran.

This situation could not only endanger these cargoes, but could also ignite a second war front, forcing other ships bound for the Suez Canal to divert around the southern tip of Africa.

Meanwhile, the United Arab Emirates, which has the ability to avoid both the Strait of Hormuz and the Red Sea, is accelerating investments in alternative routes. According to sources, they plan to expand existing infrastructure and build a new port with a container terminal on their eastern coast.

There are also other pipelines, either functional or in project phase, in Iraq, Jordan, Kuwait, and Turkey, but their capacity remains modest and unable to compensate for a major blockade of the Strait of Hormuz.

Commenting on Petroline and the Abu Dhabi pipeline, MARISKS warns that Iran’s direct threat to this alternative export infrastructure could be considered the most alarming element of current developments.

The company highlights that Tehran’s message is clear: either all regional energy producers are allowed to export, or no one will succeed.

Regardless of the next steps, Iran has made it clear that it is prepared to raise the economic cost of any aggression against it, by targeting global energy supplies, whether through blocking strategic maritime chokepoints or through retaliatory attacks on the energy infrastructure of neighboring Gulf countries.