Introduction to the Iranian Crisis
China has asked the international community to work on the de-escalation of the Iranian crisis in view of the increasing risk of a blockade of Hormuz’s street at the mouth of the Persian Gulf. The spokesman for the Ministry of Foreign Affairs said that China was working to prevent instability in the region caused by the Israel-Iran War, which was buried in the global economy.
The Iranian Parliament’s Decision
The Iranian Parliament supported the important waterway and said that the move had come to the bombing of the Iranian nuclear facilities by the United States at the weekend. After the decision, a high-ranking Iranian legislator said that Parliament had come to the conclusion that it should close the street, adding that "the final decision was located at the Supreme National Security Council".
International Reaction
US Foreign Minister Marco Rubio has asked China to prevent Iran from closing the street. "I would encourage the Chinese government in Beijing to call it [Iran] about this because they depend heavily on Hormuz’s street for their oil," said Rubio in an interview with Fox News. "If you [close the strait]… it will be economic suicide for you. And we keep options to deal with it," he said.
The Importance of Hormuz’s Street
Hormuz’s road is an important waterway that lies between Oman and Iran and connects the Persian Gulf with the Gulf of Oman and the Arab Sea. The US Energy Information Management describes it as the "world’s most important oil transit chokepoint". At its closest point, the waterway is only 33 kilometers wide, whereby the shipping lane is only 2 miles wide in both directions, which makes it overcrowded and dangerous.
The Impact of a Blockade
Large crude oil volumes that are taken from Opec countries such as Saudi Arabia, the United Arab Emirates, Kuwait, and Iraq from oil fields throughout the Persian Golf region and flow through the street worldwide. According to Vortexa, a consultant for energy and freight market, around 20 million barrels of raw, condensate, and fuels are estimated daily via the waterway. Qatar, one of the world’s largest producers of liquid gas (LNG), is heavily released on the street to send his LNG exports.
Shipowners’ Concerns
The conflict between Israel and Iran has again focused on safety in the waterway. In the past, Iran has threatened to conclude the Hormuz street for traffic on retaliation measures. Since the war between Israel and Iran broke out at the beginning of this month, there were no major attacks on commercial shipping in the region. However, shipowners are increasingly careful to use the waterway, and some ships have tightened the safety and others cancel routes there.
The Economic Impact
The electronic interference with commercial ship navigation systems has increased around the waterway and the wider Golf in the past few days, Naval said sources from the Reuters news agency. This interference affects ships that sail through the region, they said. Since there is apparently no immediate end of the conflict, the markets remain. Every blockage of the waterway or disorders of the oil streams could trigger a strong increase in raw prices and hit energy importers, especially in Asia.
The Most Affected Countries
The RRP estimates that 82% of the raw and other fuel deliveries that crossed the street went to Asian consumers. China, India, Japan, and South Korea were the top destinations with these four countries, which together made up almost 70% of all crude oil and condensate flows that crossed the street. These markets would probably be the most affected of supply disorders.
The Impact on Iran and Gulf States
If Iran took specific measures to close the street, it could possibly draw military interventions from the United States. The fifth US fleet based in the nearby Bahrain has commissioned the protection of commercial shipping in the region. Any movement of Iran to disturb the oil flows through the waterway could also endanger Tehran’s relationships with Golf-Arab states such as Saudi Arabia and the United Arab Emirates – countries with which Iran has carefully improved relationships in recent years.
Alternatives to Hormuz’s Street
Golf Arab nations such as Saudi Arabia and the United Arab Emirates have been looking for alternative routes in recent years to avoid the street. Both countries have set up the infrastructure to transport part of their crude oil over other routes. Saudi Arabia, for example, operates the East-West Rohölpipeline with a capacity of 5 million barrels a day, while the VAE has a pipeline that connects its onshore oil fields with the export terminal of the Fujairah export connection on the Gulf of Oman. The RRP estimates that around 2.6 million barrels of crude oil could be available per day to avoid Hormuz’s road in the event of disorders in the waterway.
