Dubai, UAE. The widening war in Iran has brought tanker traffic through the Strait of Hormuz to a halt and sent oil prices soaring, underscoring the narrow passage’s central role in the global energy supply.

The Strait forms the narrow mouth of the Persian Gulf, through which about a fifth of the world’s oil passes. Tankers traveling the waterway — bordered to the north by Iran — carry oil and gas from Saudi Arabia, Kuwait, Iraq, Qatar, Bahrain, the United Arab Emirates, and Iran. Most of that oil is bound for Asia.

Any disruption to traffic through the Strait of Hormuz can significantly disrupt global oil trade.

“The scale of what is at stake cannot be overstated,” said Hakan Kaya, senior portfolio manager at investment management firm Neuberger Berman. He said a partial slowdown lasting a week or two could likely be absorbed by oil companies. But a full or near-full closure lasting a month or more would push crude oil prices, trading above $75 on Tuesday, “well into triple digits” and drive European natural gas prices “toward or above the crisis levels seen in 2022.”

Here’s what to know about the Strait and the widening Iran war.

A Key Waterway for Global Shipping

The Strait of Hormuz is a winding waterway about 33 kilometers (21 miles) wide at its narrowest point. It connects the Persian Gulf to the Gulf of Oman, allowing ships to transit onward to the rest of the world.

Although Iran and Oman control territorial waters within the strait, it is generally regarded as an international waterway open to commercial traffic. The United Arab Emirates, home to the skyscraper-lined city of Dubai, also sits near the passage.

A Historic Trade Route

The Strait of Hormuz has long been a critical trade route. For centuries, ceramics, ivory, silk, and textiles moved from China through the region.

In the modern era, it serves as a conduit for supertankers transporting oil and liquefied natural gas from Saudi Arabia, Kuwait, Iraq, Qatar, Bahrain, the UAE and Iran. The vast majority of those exports head to markets in Asia, including China, Iran’s primary remaining oil customer.

While Saudi Arabia and the UAE operate pipelines that can bypass the strait, the U.S. Energy Information Administration says “most volumes that transit the strait have no alternative means of exiting the region.”

Threats to the route have rattled energy markets before, including during the Israel-Iran war in June.

Is the Strait Closed?

Iran has attacked several ships in the Strait and warned vessels against attempting passage, effectively halting traffic. But a move by President Donald Trump on Tuesday aimed at protecting tankers could help restore flows.

“The Strait of Hormuz is closed,” Iranian Brig. Gen. Ebrahim Jabbari, an adviser to the paramilitary Revolutionary Guard, said, vowing that any ship attempting to pass would be set ablaze.

Earlier, Iran temporarily shut parts of the strait in mid-February for what it described as a military drill. Oil prices rose about 6% in the following days.

During past periods of tension, Iran has harassed shipping through the narrow channel. In the 1980s Iran-Iraq war, both sides attacked tankers and other vessels, deploying naval mines that at times halted traffic entirely. However, Iran has not followed through on repeated threats to close the waterway outright since that conflict, even during last year’s 12-day war, when Israel and the U.S. struck Iranian nuclear and military sites.

On Tuesday, Trump outlined a plan to help restart oil and trade flows through the strait.

In a social media post, he said he directed the U.S. development finance agency to provide political risk insurance for tankers carrying oil and other goods through the Persian Gulf “at a very reasonable price.”

Political risk insurance protects companies against losses stemming from political instability, government actions or violence. Marine insurers have been canceling coverage or sharply raising premiums for ships operating in the region.

Trump added that, if necessary, the U.S. Navy would escort oil tankers through the Strait of Hormuz. The Navy has at least eight destroyers and three smaller littoral combat ships in the region, vessels previously used to escort commercial shipping in the Middle East and the Red Sea.

Global Shippers Suspend Operations

Major shipping companies have issued service alerts announcing suspensions in the area. Danish shipping giant Maersk, the world’s largest container carrier, said Sunday it is suspending all vessel transits through the Strait of Hormuz until further notice. Other carriers, including Hapag-Lloyd, CMA CGM, and MSC, have made similar announcements.

“Those ships that got stuck in the Gulf are not going anywhere,” said Tom Goldsby, chair of the Supply Chain Management Department at the University of Tennessee. “There’s also a whole host of ships that were heading into the Gulf to replace them, and of course, they’re anchored or diverting elsewhere now.”

About 3,200 ships — roughly 4% of global shipping tonnage — are idle inside the Persian Gulf, according to estimates by Clarksons Research, which tracks maritime data. That figure includes about 1,231 vessels that likely operate only within the Gulf. Roughly 500 ships, or about 1% of global tonnage, are currently waiting outside the Gulf at ports off the coasts of the UAE and Oman, the firm said.

Add as a preferred source on Google +