THE HORMUZ FACTOR: FEAR RISES OF SPIKE IN GLOBAL OIL PRICES

With the US and Israel bombing Iran and reportedly eliminating at least two of its top officials, energy experts have expressed concerns over the latest crisis in West Asia to result in an immediate increase of about 5-10% in global oil prices.

- SHIKHA SALARIA

With the global oil market already showing volatility in the wake of the latest conflict in the region, experts are not ruling out the likelihood of a temporary disruption or a closure of the Strait of Hormuz—one of the key waterways of the world that links the Gulf to the Indian Ocean, which Iran has used as a leverage in times of crisis in the past. The latest information is that Iran is moving to block Hormuz.

The US Energy Information Administration (EIA) describes it as “one of the world’s most important oil chokepoints” from which about one-fifth of the global oil and petroleum product consumption flows, averaging 20 million barrels per day in 2024. Iran had briefly closed parts of the Strait of Hormuz recently to conduct live-fire naval drills codenamed “Smart Control of the Strait of Hormuz”—a move that coincided with the second round of indirect talks between Iran and the US held in Geneva.

The Strait has been used as a leverage by Iran at several crucial points of history including during the 1980s Iran-Iraq war, the 2012 sanctions on Iran and also during the 12-day war between Iran and Israel in June 2025.

On June 23, 2025, Iran’s parliament had voted in support of closing the Strait but the country’s National Security Council never activated it.

The escalation of the latest conflict between Iran and Israel has signalled that it could spiral into a prolonged war but crude prices had firmed up by 10% ever since the US started positioning military assets in the region.