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STRAIT OF HORMUZ CLOSURE THREAT from Vajirao & Reddy Institute

By : Author Desk Updated : 2025-06-25 14:41:03

STRAIT OF HORMUZ CLOSURE THREAT

Context: June 2025 Trigger: U.S. airstrikes on Iran’s nuclear facilities Reaction: Iran’s Parliament passed a motion recommending closure of the Strait of Hormuz WHY IN NEWS?
  • In June 2025, following U.S. military strikes on Iran’s nuclear facilities, Iran’s Parliament approved a resolution to close the Strait of Hormuz as retaliation.
  • The final decision rests with Iran’s Supreme National Security Council, which operates under the Supreme Leader.
  • This move has raised global concerns about oil supply disruptions and economic instability.
ABOUT STRAIT OF HORMUZ
Feature Details
Location Between Iran (north) and Oman & UAE (south)
Width ~50 km at entrance; ~33 km at narrowest point
Function Connects Persian Gulf to Gulf of Oman and Arabian Sea
Legal Status Lies within territorial waters of Iran and Oman
Importance World’s busiest oil transit chokepoint
Volume of Trade ~20 million barrels/day (~20% of global oil supply)
Annual Value ~$600 billion in oil and gas trade (U.S. EIA estimate)
Main Exporters Iran, Iraq, Saudi Arabia, UAE, Kuwait, Qatar
Main Importers India, China, Japan, South Korea
WHAT COULD HAPPEN IF THE STRAIT IS CLOSED? 1. Oil Prices Could Surge
  • Oil prices may jump from $77 to $120–$150 per barrel.
  • This would raise fuel costs globally and affect domestic inflation in many countries.
2. Stock Markets and Trade Would Suffer
  • Global stock markets may react negatively due to uncertainty.
  • Central banks could revise inflation and interest rate outlooks.
3. Global Supply Chains Will Be Affected
  • Increased shipping times (10–14 days longer via Cape of Good Hope).
  • Higher freight and insurance costs, especially for oil shipments.
4. Higher Costs for Manufacturing Countries
  • Countries like India, China, Japan, and South Korea will face higher energy and manufacturing costs.
  • These costs will be passed on to consumers, increasing global inflation.
IMPACT ON INDIA India’s Oil Dependency
  • India imports ~88% of its crude oil needs.
  • India consumes ~5.5 million barrels per day (bpd).
    • 1.5 to 2 million bpd comes through the Strait of Hormuz.
    • ~4 million bpd comes via other global routes.
BREAKDOWN OF IMPORT ROUTES (KPLER ESTIMATES)
Route Share of Imports Main Source Countries
Strait of Hormuz ~40% Iraq, Saudi Arabia, UAE, Kuwait
Suez Canal ~33% Russia
Cape of Good Hope ~17% West Africa, Americas
Other Routes ~10% Southeast Asia, Far East
KEY RISKS FOR INDIA
Risk Category Specific Effects
Oil Price Hike Increased import bill, inflation, fiscal burden
Freight & Insurance Longer routes ? Higher transport costs and delivery delays
Currency Depreciation Pressure on rupee ? Wider current account deficit
Trade Disruption Container shortages may affect exports and imports (esp. Europe-Asia corridor)
WHAT DID INDIA’S OIL MINISTER SAY? Minister Hardeep Singh Puri (June 23, 2025):
  • “We have diversified our oil sources in the past few years.
  • A large volume of our supplies no longer come through the Strait of Hormuz.
  • Our Oil Marketing Companies have supplies for several weeks and continue to receive energy through several routes.”
The Minister also:
  • Held a high-level security review with officials from the Navy, Coast Guard, ONGC, and Defence Ministry.
  • Reaffirmed the government’s commitment to ensure uninterrupted fuel supply.
HOW COULD IRAN BLOCK THE STRAIT?
Method Description
Naval Mines Laid using submarines or small attack boats
IRGC Fast Boats Swarm attacks using speedboats with anti-ship missiles
Submarine Warfare Attacks on commercial or military vessels using submarines
Semi-submersibles Hard-to-detect vessels targeting oil tankers
Historical Reference: In the 1980s, during the Iran–Iraq war, similar tactics led to the "Tanker War" where both nations attacked commercial oil shipments. U.S. Response:
  • Fifth Fleet is stationed in Bahrain.
  • Past success: Operation Earnest Will (1987–88) safely escorted Kuwaiti oil tankers.
WILL IRAN ACTUALLY CROSS THE STRAIT?
Factor Explanation
Loss of Own Oil Revenue Iran earns ~$67 billion from oil exports (FY 2024–25)
China is a Key Buyer China buys ~90% of Iranian oil – would be negatively impacted
Diplomatic Isolation Gulf countries (Saudi Arabia, UAE) may turn hostile
U.S. and Allied Response Risk of direct military conflict
Gulf Normalization Setback Iran’s recent regional diplomacy could collapse
ARE THERE ANY EXPORT ROUTES?
Country Pipeline Name Capacity (approx.)
Saudi Arabia East–West Pipeline (Petroline) 5 million barrels/day
UAE Habshan–Fujairah Pipeline 1.5 million barrels/day
Iran Goreh–Jask Pipeline ~350,000 barrels/day
Limitation: These can handle ~3.5 million bpd, while the Strait handles ~20 million bpd.   Note: Connect with Vajirao & Reddy Institute to keep yourself updated with latest UPSC Current Affairs in English. Note: We upload Current Affairs Except Sunday.