The International Energy Agency (IEA) stated in a report that any disruption to transit flows in the Strait of Hormuz (SoH) would have significant consequences for global oil and LNG markets. The report, issued in December 2023, notes that prolonged disruption will trigger a sharp surge in oil prices and lead to swift, widespread supply shortages. Moreover, worldwide LNG supply could fall by approximately 295 mmcm/d.

SoH is a narrow, strategically vital waterway located between the Persian Gulf and the Gulf of Oman, separating Iran to the north and Oman and the UAE to the south. It serves as a crucial route linking oil and gas producers in the Middle East Gulf with global export markets.

Furthermore, 20 million mmbl/d are passing through the strait, representing 30% of global oil trade. Around 70% of these transits are heading to Asia. In addition, all liquefied natural gas (LNG) exports from Qatar and the UAE are transported through the SoH, making up 20% of global LNG trade. The strait remains the only export route for LNG from both countries.

Iran has repeatedly threatened to close or disrupt shipping through the Strait of Hormuz in response to geopolitical pressure—particularly U.S. sanctions or military activity. These threats are rooted in Iran’s strategic position and the strait’s central role in global energy trade. Following Israeli strikes in Iran, there are speculations for Iran to close the strait.

The agency added that the transit is a key route for the oil exported by Saudi Arabia, the UAE, Kuwait, Qatar, Iraq and Iran. However, there are alternative routes for oil exported from the Gulf including Saudi Arabia’s pipeline to the Red Sea and the UAE’s pipeline to the Port of Fujairah. IEA reported that 6.5 mmb/d of oil could be exported from these alternative routes. On the other hand, Iran depends exclusively on its Gulf terminals to export to markets outside the Caspian region.