Oil prices surged and global stock markets tumbled Wednesday as Iran declared the Strait of Hormuz closed to most commercial traffic, escalating tensions following recent U.S. And Israeli strikes within Iran. The Islamic Revolutionary Guard Corps (IRGC) warned it would open fire on any vessel attempting unauthorized passage through the vital waterway, according to state media reports.
The closure, a retaliatory measure for the attacks on Iranian soil, immediately impacted crude oil markets. Prices rose by as much as 4% in early trading, despite a prior release of strategic oil reserves by the International Energy Agency (IEA), according to reports from the Wall Street Journal. U.S. Stock futures fell sharply, with the Dow Jones Industrial Average dropping over 500 points in pre-market trading.
The Strait of Hormuz, a narrow passage between Iran and Oman, is one of the world’s most strategically important oil chokepoints. Approximately 20% of the world’s oil and natural gas passes through the strait daily, making it a critical artery for global energy supplies. The waterway narrows to just 21 miles at its narrowest point, giving Iran significant control over maritime traffic. According to the Guardian, the strait carries just over 20 million barrels of oil a day, second only to the Strait of Malacca in volume.
While Saudi Arabia and the United Arab Emirates have constructed pipelines designed to bypass the strait, these routes currently have limited capacity and cannot accommodate the region’s total export volume. This dependence on the strait amplifies Iran’s ability to disrupt global energy flows.
The IRGC’s announcement follows a period of escalating conflict. Earlier this week, Iranian state media reported that U.S. Missiles sank several Iranian ships, prompting the IRGC to claim “complete control” of the strait. Maritime traffic had already decreased by 80% by Sunday, according to Lloyd’s List Intelligence.
The U.S. Has not yet commented on the reports of an oil tanker being set ablaze by Iranian forces, an incident reported by Iranian state media. However, President Trump previously stated that the U.S. Navy would be deployed to escort oil tankers “if necessary.”
Experts warn that prolonged restrictions on shipping through the Strait of Hormuz could send oil prices significantly higher, potentially into triple digits, and cause major disruptions to global supply chains. The Independent reports that the closure threatens major disruption to global supply chains.
As of Wednesday afternoon, the U.S. State Department had not issued a formal response to Iran’s declaration. The White House has scheduled an emergency meeting of the National Security Council for Thursday morning to discuss the situation and potential responses.
