Will Iran block the Strait of Hormuz?

Summary

Summary of "Will Iran Block the Strait of Hormuz?"
The Indicator from Planet Money
Release Date: June 24, 2025
Host: Darren Woods and Paddy Hirsch
Produced by: NPR

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Introduction: The Strategic Strait

In the episode titled "Will Iran Block the Strait of Hormuz?", hosts Darren Woods and Paddy Hirsch delve into the geopolitical significance of the Strait of Hormuz—a narrow maritime chokepoint approximately 100 miles long and 24 miles wide at its narrowest point. This strait serves as the gateway to the otherwise landlocked Persian Gulf, making it a pivotal artery for global energy supplies.

Darren Woods emphasizes, “It is important because roughly a quarter of the oil shipped in the world and a fifth of all the liquefied natural gas passes through this choke point, the northern bank of which is part of the Republic of Iran” (00:32).

Historical Significance and Current Tensions

The Strait of Hormuz has been a crucial trade route for millennia, but its global importance surged post-World War II with the increase in oil extraction and shipping from the Middle East. Elizabeth Brauer, leader of the Maritime Threats Initiative at the Atlantic Council, explains, “That is the route you have to take to transport oil from a number of Middle Eastern countries to their global destination” (03:14).

Recently, tensions have escalated following US strikes against Iran, leading the Iranian parliament to vote on potentially closing the strait as part of its response to bombings of its nuclear facilities. While the final decision rests with Iran's National Security Council, the mere threat has heightened global concerns about the stability of energy supplies.

Potential Impacts of a Strait Blockade

Rachel Ziemba, an economist and strategist at the Center for New American Security, provides historical context by recalling the Iran-Iraq war in the 1980s, when “Commercial shipping volume through the Strait of Hormuz dropped by 25% and oil prices spiked” (04:57). Although the strait never fully closed, the incident underscores the significant economic repercussions a blockade could trigger.

Paddy Hirsch notes the resurgence of fears amid the current US-Iran-Israel conflict: “This new conflict... is making some people worry that Iran might decide to flex its maritime muscle again” (04:57).

Mechanisms of Disruption and Risks

While a full blockade is unlikely due to the vast area of the strait and frequent US naval patrols, Iran could still disrupt shipping through alternative methods. Rachel Ziemba suggests, “The issue is not only the territory, but also what could be done with vessels and drones to potentially make it harder to go in and out of the strait” (05:46). Additional concerns include potential missile attacks on energy infrastructure and tanker-specific assaults, which complicate the shipping landscape.

Economic Repercussions and Market Volatility

The uncertainty caused by threats to the Strait of Hormuz has tangible effects on global oil markets. Following US actions against Iran, oil prices surged by as much as 10% but later retreated by 7%, illustrating the volatile nature of energy markets in response to geopolitical tensions. This volatility impacts even countries like the United States, which, despite minimal direct oil imports from Gulf states, is affected by global oil pricing dynamics.

Paddy Hirsch summarizes the economic stakes: “Oil is priced in a global market, so a shortage in supply resulting from a blockade... would still affect Americans” (07:34).

Role of the Insurance Industry as an Indicator

A key focus of the episode is the role of the insurance industry in signaling the likelihood of maritime disruptions. Elizabeth Brauer points out that “Maritime insurance is indispensable for anybody trying to understand maritime threats” (08:39). The Joint War Committee, a group within maritime insurance companies, monitors seaways and issues threat warnings based on comprehensive risk assessments.

Despite heightened tensions, the Joint War Committee remains cautiously optimistic, having not advised members to cease shipping through the Strait of Hormuz. Elizabeth Brauer states, “The international shipping community is pretty calm about the situation... unlikely that that violence will spill into attacks on shipping in the Strait of Hormuz” (09:49). This sentiment is reinforced by the committee's historical accuracy, such as predicting Russia's invasion of Ukraine in 2022 when many analysts did not foresee it.

Market Responses and Mitigation Strategies

In response to security concerns, fuel producers are encouraging tankers to adopt a “just in time” approach—waiting outside the strait and arriving only shortly before refueling (06:32). Additionally, insurance premiums for ships navigating the strait have surged, incentivizing vessels to minimize their time within this narrow passage (06:51). This has led to congestion in adjacent maritime areas, such as the Arabian Sea, increasing the risk of accidents like vessel collisions, which may or may not be related to regional tensions.

Global Repercussions and Iran’s Strategic Calculations

A blockade of the Strait of Hormuz by Iran would not only disrupt global energy supplies but also provoke severe backlash from the international community. Elizabeth Brauer asserts, “A blockade... would anger most of the rest of the world and alienate potential supporters. It would also inhibit Iran's ability to supply oil to one of its most important customers, China” (08:26). Consequently, such an action would have significant diplomatic and economic costs for Iran, making a full-scale blockade an unlikely move despite escalating regional conflicts.

Conclusion: Assessing the Likelihood of a Strait Blockade

Considering the multifaceted risks and the heavy costs associated with a Strait of Hormuz blockade, the episode concludes that while Iran possesses the capacity to disrupt shipping flows, the likelihood of a full or sustained closure remains low. The intricate balance of global economic interdependence, potential retaliation, and Iran’s own economic interests serve as strong deterrents against such a move.

Darren Woods encapsulates the expert consensus: “This uncertainty, compounded by the American bombing, has rattled the oil market” (07:34). However, the resilience of maritime insurance assessments suggests that the shipping industry does not currently view an imminent blockade as probable, despite ongoing tensions.

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Notable Quotes:

• Darren Woods (00:32): “It is important because roughly a quarter of the oil shipped in the world and a fifth of all the liquefied natural gas passes through this choke point, the northern bank of which is part of the Republic of Iran.”

• Elizabeth Brauer (03:14): “That is the route you have to take to transport oil from a number of Middle Eastern countries to their global destination.”

• Rachel Ziemba (05:46): “The issue is not only the territory, but also what could be done with vessels and drones to potentially make it harder to go in and out of the strait.”

• Elizabeth Brauer (08:39): “Maritime insurance is indispensable for anybody trying to understand maritime threats.”

• Elizabeth Brauer (09:49): “The international shipping community is pretty calm about the situation... unlikely that that violence will spill into attacks on shipping in the Strait of Hormuz.”

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Production Credits:
Produced by Cooper Katz McKim
Engineering by Patrick Murray
Fact-checked by Tyler Jones
Edited by Julia Ritchie and Kay Concannon
The Indicator is a production of NPR.

Transcript

[NPR]

NPR.

[Darren Woods]

This is the Indicator from Planet Money. I'm Darren Woods.

[Paddy Hirsch]

And I'm Paddy Hirsch. Right now, following US Strikes against Iran, perhaps the most watched corner of the world is a strip of water about 100 miles long and just 24 miles wide. @ its narrowest point, it's called the Strait of Hormuz, and it's the gateway to the otherwise landlocked Persian Gulf.

[Darren Woods]

It is important because roughly a quarter of the oil shipped in the world and a fifth of all the liquefied natural gas passes through this choke point, the northern bank of which is part of the Republic of Iran.

[Paddy Hirsch]

Part of Iran's response to the bombing of its nuclear facilities was a vote in the Iranian parliament over the weekend to close the Strait of Hormuz. Though a final decision would lie with Iran's National Security Council, Iran has threatened to shut the Strait down in the past, and while it has never actually done so, a lot of people are worried that this time could be different.

[Darren Woods]

On today's show, we'll learn why the Strait of Hormuz has become such an important pressure point in geopolitics and whether Iran could indeed close it off and throttle the supply of oil to the rest of the world.

[Paddy Hirsch]

We'll also find out how the most important indicator of what might happen in the Strait could be the insurance industry. That's coming up after the break.

[NPR]

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[Michael Hosmar]

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[Paddy Hirsch]

Has been pivotal to trade in the Middle east for millennia, but it took on global importance after the Second World War. That's when companies began drilling and extracting oil from the region in earnest and shipping it around the world.

[Darren Woods]

And back then, pretty much every drop of the black stuff went through the Strait of Hormuz.

[Elizabeth Brauer]

That is the route you have to take to transport oil from a number of Middle Eastern countries to their global destination.

[Darren Woods]

Elizabeth Brauer leads the Maritime Threats Initiative at the Atlantic Council, a think tank.

[Elizabeth Brauer]

If you can't go through the Strait of Hormuz, you cannot choose another route. You either sail through there or you don't conduct your business.

[Paddy Hirsch]

Iran, Iraq, Kuwait, Saudi Arabia, Qatar, Bahrain and the United Emirates all ship oil and gas through the strait. Some have tried to get around this choke point. Both Saudi Arabia and the UAE have built pipelines that allow them to get some oil out of the region by land.

[Darren Woods]

But pipelines are expensive to build and maintain. And most of the oil and gas produced in the Persian Gulf still goes out by sea. As we mentioned, that is a quarter of the global supply of shipped oil and a fifth of the world's supply of liquefied natural gas.

[Paddy Hirsch]

And this has put Iran, which owns the coastline to the north of the Strait of Hormuz, in a position of great potential influence. It could, if it chose, throttle trade in the world's key energy sources. Rachel Ziemba is an economist and strategist at the center for New American Security.

[Rachel Ziemba]

This has been a well known choke point for many, many decades. And Iran has definitely threatened to block the straits. They've never done it, but there have been times where it was much harder for vessels to get in and out.

[Darren Woods]

For example, during the Iran Iraq war in the 1980s, Iraq attacked Iran's oil tankers. Iran responded by attacking shipping operated by Iraq's trading partners as well as countries that loaned Iraq money to support its war efforts.

[Paddy Hirsch]

Commercial shipping volume through the Strait of Hormuz dropped by 25% and oil prices spiked. The strait never actually closed. But this new conflict between Israel and Iran and now the United States is making some people worry that Iran might decide to flex its maritime muscle again.

[Rachel Ziemba]

It's far from a new thing to think about chokepoints. But with the escalation of conflict, exchange of fire, and just even the potential for accident, this is very much in focus right now.

[Darren Woods]

Rachel says that if Iran did decide to act, it would probably not try to literally blockade the Strait of Hormuz. It's 21 miles wide, after all, and the US Navy patrols the strait frequently. But that doesn't mean that Iran couldn't inhibit traffic in other ways.

[Rachel Ziemba]

The issue is not only the territory, but also what could be done with vessels and drones to potentially make it harder to go in and out of the strait.

[Paddy Hirsch]

Also, Rachel says Middle east watchers worry about missile attacks on energy infrastructure by Iran or one of its proxies in the region.

[Rachel Ziemba]

We're also maybe more worried about whether individual tankers might face attacks and damage. There's a lot of scenarios out there which I think the market is struggling to price right now.

[Darren Woods]

Even before the US bombed Iran and the Iranian parliament voted to close the strait, Rachel says that concerns about a deterioration of security in the region were already affecting shipping.

[Rachel Ziemba]

What is happening right now is that a number of fuel producers are encouraging tankers to wait outside the straits and only come in, say, the night before they're going to be refilled. I would call it just in time, gas or oil refilling.

[Paddy Hirsch]

What's more, Rachel says insurance companies were beginning to boost premiums for ships that wanted to navigate the strait, but enough to make them want to keep their time in the channel to a minimum.

[Darren Woods]

The result is now there's a bit of a traffic jam in the Arabian Sea on the other side of the strait from the Persian Gulf, and that implies complications in an already complex area.

[Rachel Ziemba]

There are risks in this kind of traffic jam. There was, for example, a collision of two vessels. It hasn't been confirmed that it has anything to do with the escalation of regional tensions. But in this time where there's a lot of attempts to avoid financial sanctions and the like, this is just a time.

[Paddy Hirsch]

That uncertainty, compounded by the American bombing, has rattled the oil market. Prices for oil rose as much as 10% after Israel first struck Iran on June 13. But as of Monday, prices retreated, falling 7%. That volatility affects everyone, whether or not they buy oil directly from the Gulf states. The U.S. for example, buys hardly any oil from the Gulf. But oil is priced in a global market, of course. So a shortage in supply resulting from a blockade of the Strait of Hormuz, which would still affect Americans, closing the.

[Darren Woods]

Strait, then, is a way for Iran to retaliate and strike at the US Economy. But Rachel Ziemba and Elizabeth Brough say that a blockade or an attempt to slow shipping would anger most of the rest of the world and alienate potential supporters. It would also inhibit Iran's ability to supply oil to one of its most important customers, China.

[Paddy Hirsch]

All of this means that a blockade, even a partial one, just doesn't look likely, even after the bombing campaign by the US Elizabeth Brough says her key indicator for tensions in the Strait of Hormuz is the maritime insurance market.

[Elizabeth Brauer]

Maritime insurance is indispensable for anybody trying to understand maritime threats. That is where the best knowledge resides. Simply because if you as the insurer or as the insurance industry, if you get it wrong, you will be paying a lot of money when one of the ships that you have insured is harmed in some way.

[Darren Woods]

Yeah, they have skin in the game, not just pontificating on the couch like you and me.

[Paddy Hirsch]

Like real money involved.

[Darren Woods]

Yes.

[Paddy Hirsch]

And Elizabeth says to monitor the insurance world, she keeps a close eye on risk assessment reports issued by something called the Joint War Committee.

[Darren Woods]

The Joint War Committee. That sounds like a fairly belligerent title for an insurance organization.

[Paddy Hirsch]

These insurance companies can get punchy. Right. The Joint War Committee is a group of representatives of maritime insurance companies that monitor seaways and issue threat warnings. And they've got a pretty good record. Predicted Russia's invasion of Ukraine in 2022, for example, when most analysts thought Russia wouldn't invade.

[Darren Woods]

And despite the attacks by Israel and the US On Iran, the Joint War Committee seems relatively sanguine about the risk to shipping in the Strait of Hormuz.

[Elizabeth Brauer]

Right now, the Joint War Committee has not told its members that they should stop sailing through the Strait of Hormuz. The international shipping community is pretty calm about the situation in the Strait of Hormuz simply because they know that even though tensions are indisputably high and even though there is violence, it is unlikely that that violence will spill into attacks on shipping in the Strait of Hormuz.

[Paddy Hirsch]

A blockade on international shipping by Iran would inflame tensions and alienate allies and trading partners. Elizabeth says the reaction from the world's nations would be so severe, she says, that it would be a price not worth paying.

[Darren Woods]

This episode was produced by Cooper Katz McKim with engineering by Patrick Murray. It was fact hacked by Tyler Jones. Julia Ritchie edited this episode and Kay Concannon is the show's editor. The indicator is a production of npr.

[Michael Hosmar]

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[NPR]

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