As tensions rise between Iran and Israel, Alex Hodes, Director of Energy Market Strategy at StoneX, breaks down the energy market implications of potential disruptions in the Strait of Hormuz.
Key Takeaways
Strait of Hormuz disruption could affect 20% of global oil supply
Saudi Arabia and UAE have limited alternatives to bypass chokepoint
Potential for oil prices to reach $100 if escalation continues
Strait of Hormuz: A Global Oil Lifeline
Roughly 20 million barrels of oil per day move through the Strait of Hormuz, accounting for 20% of global supply. This makes it one of the world’s most strategically significant energy corridors. As Alex Hodes explains, “It’s a supply route for some of the major Gulf oil producers, including Saudi Arabia, the UAE, Qatar, Oman as well”.
Iranian Threats and Supply Risks
Although Iran has repeatedly threatened to close the strait, Hodes assesses that such a full closure remains unlikely. “Judging by their rhetoric… it is unlikely that this is the case,” he says. Instead, he highlights Kharg Island—a terminal responsible for 90% of Iranian oil exports—as a more immediate vulnerability.
Tanker Disruptions and Electronic Warfare
Even without a closure, there are growing signs of interference. “Overnight, there was actually a collision between two UAE tankers,” says Hodes, noting over 900 vessels in the region lost navigation signals. Tanker rates may spike, but historical precedent suggests flows won’t halt entirely.
Which Countries Are Most Exposed?
Saudi Arabia appears most exposed, sending 5.5 million barrels per day through the strait. However, they’ve built a key pipeline allowing them to divert up to 7 million barrels to the Red Sea. The UAE, exporting 3.3 million barrels per day, is also at risk but has limited rerouting options.
What If the Strait Closes?
Most producers lack meaningful alternatives. “Only the UAE and Saudi Arabia have really developed the infrastructure to avoid it,” says Hodes. In a full closure scenario, oil could “see prices back into the $100 per barrel level”.
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--- Expert: Alex Hodes, StoneX Director of Energy Market Strategy
Energy
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