Amid rising geopolitical tensions in the Persian Gulf, the possibility of a blockade of the Strait of Hormuz is back in the spotlight. Just this past weekend, Iranian state broadcaster Press TV reported that Iran’s parliament had approved a measure to close the vital waterway. If the Iranian leadership follows through, what would this mean for Europe—and the rest of the world?
Researchers at the Complexity Science Hub (CSH) and the Supply Chain Intelligence Institute Austria (ASCII) have analyzed current shipping data to provide an initial assessment of the potential global impact:
The Strait of Hormuz is one of the world’s most important chokepoints for energy production. Approximately 20% of the world’s liquefied natural gas and 30% of its crude oil, equivalent to 20 million barrels per day, pass through it. It connects the Persian Gulf to the Strait of Oman, and consequently to the global shipping network. To the south, it borders Oman and the United Arab Emirates; to the north, it borders Iran. Notably, it provides the United Arab Emirates, Bahrain, Kuwait, Iraq, and Qatar with access to the open sea. Iran has repeatedly threatened to block the strait, and the current escalations risk further intensifying this threat.
It is hard to estimate what percentage of the ships passing through the Strait of Hormuz carries cargo destined for Europe. Based on trade statistics, the majority of trade is destined for Asia. Using an extensive dataset of vessel tracking data covering the last six years and containing detailed information on shipment routes and vessel types, we can estimate the number of vessels passing per year, as well as the percentage going to any given country.
“We estimate that around 10% of tanker trade passing through the Strait of Hormuz is destined for the European Union,” explains Peter Klimek of CSH and ASCII. This corresponds to 4% of tanker trade destined for the EU passing through the strait, highlighting the EU’s limited direct dependence on tankers passing this chokepoint for its energy supply.
Notably, for crude oil and LNG, the Strait of Hormuz can also be bypassed by the East–West Crude Oil Pipeline and the Abqaiq-Yanbu NGL Pipeline, respectively. These twin pipelines, which connect Qatar and Bahrain to the west of Saudi Arabia, offer an alternative route, but they are already operating close to capacity and are vulnerable, as recent Houthi attacks have shown. Furthermore, waterways are the most efficient mode of transportation for bulk shipping, so it’s hard to envision alternatives in case the Strait of Hormuz is blocked. This affects, among other things, the global aluminum trade. Due to the region’s abundance of energy, it is home to some of the world’s largest aluminum smelters. The United Arab Emirates accounts for around 20% of the world’s aluminum exports.
It is difficult to estimate how likely such a dramatic geopolitical development as the blockade of the Strait of Hormuz actually is. However, the mood on the financial markets provides an indication: Crude oil futures on the Chicago Mercantile Exchange have risen only slightly — from 65 to 74 dollars. This indicates that the markets do not currently view Iran’s threats as credible. Similarly, the Polymarket platform, where users can bet on global political events, shows a probability of 28%.
From a geopolitical perspective, there are also significant risks for the EU, despite the comparatively low direct dependence on transport through the strait. A blockade could lead to a global oil price shock that would massively affect all countries, regardless of whether these countries are allied with Iran or not. Paradoxically, the USA would be less affected in this scenario than the EU due to its high level of self-sufficiency
