The world woke up today with a dangerous contradiction: while in the aseptic halls of Geneva the diplomats of the United States and Iran they shake hands cautiouslyin the waters of the Persian Gulf, the speedboats of the Revolutionary Guard block the passage of oil tankers. It doesn’t take a missile to fall for the global economy to feel the impact; Fear is trading higher and traveling faster than any ship.
The Strait of Hormuz, the planet’s energy jugular, has undergone closure “partial and temporary” for the first time since tensions escalated in January. For the consumer, this is not a distant headline: the price of Brent oil has already increased by 13% so far this year. An increase in prices that does not respond to a real lack of supply, but rather to the geopolitical risk premium. We are paying for what could happen, not for what has happened.
As confirmed by Iranian state media cited by EuronewsTehran ordered the partial closure of the Strait of Hormuz under the justification of “security precautions.” The Iranian Fars news agency, referenced by Deutsche Welleexplained that this maneuver responds to the military exercises called “Intelligent Control of the Strait of Hormuz.” It is an unprecedented move in this crisis: it is the first time that Iran has physically closed sectors of the waterway since the US administration threatened military action last January.
However, it is important to clarify the operational scope so as not to fall into unjustified alarmism. Jakob Larsen, safety director at Bimco (the association representing global shipowners), explained to the CNBC that it is not an indefinite total block. The closure affects the incoming “traffic separation scheme” area and lasts “several hours.” Iranian authorities have asked commercial ships to stay away from the exercise zone, which is causing delays and “minor inconveniences,” but the flow has not stopped completely.
A 33 kilometer funnel for 20% of the world’s oil
To understand why the market is holding its breath, you have to look at the map. The United States Energy Information Administration (EIA) rate this step as the “choke point” (chokepoint) most important in the world for oil transit.
The figures are overwhelming:
- Volume: About 20 million barrels of crude oil, condensates and refined products flow through this artery daily.
- Global Impact: According to data from consulting firms Vortexa and Kplerthis represents approximately 20% of global consumption of petroleum liquids and nearly 30% of maritime crude oil trade.
The problem is geographical. As explained D.W.At its narrowest point, the road is just 33 kilometers wide. But crucially, the safe navigable route for large supertankers is only two miles wide in each direction. It’s a perfect funnel where any interruption, no matter how small, creates an immediate domino effect.
He timing of this military operation is not a coincidence; It’s a message. As analyzed Euronewsthe partial closure occurred exactly while the second round of nuclear talks between Abbas Araghchi, Iranian Foreign Minister, and Steve Witkoff, US special envoy, was being held in Geneva. For this reason, Tehran is using the strait as a negotiating lever. The United States has increased its military pressure with the deployment of the aircraft carrier USS Gerald R. Ford in the region, in response to both Iran’s nuclear ambitions and the bloody repression of internal protests shaking the Persian country.
Paradoxically, diplomacy seems to advance while the guns are aimed. According to ReutersAraghchi confirmed after the meeting that a “principle of agreement” has been reached on the bases of a future relationship, although he warned that closing the final pact will be a slow process. Iran shows its fist in the sea while offering its hand in Switzerland.
The price mirage: why do we pay the “fear premium”?
The market reaction has been an emotional rollercoaster in the last 24 hours:
- Tuesday’s mirage: Initially, when the progress in Geneva became known, the price of oil fell. The barrel of Brent fell 1.8% (to $67.36) and West Texas Intermediate (WTI) lost 1%. The markets “bought” the hope of peace.
- Today’s reality, Wednesday: The trend has reversed. Prices are recovering and rising again. As explained in OilPricethe traders have reevaluated the situation: the final agreement seems distant and the physical closure of the strait, although partial, is a tangible reality today.
As Sugandha Sachdeva points out, analyst cited by Reutersthe market is experiencing a “technical rally” because doubt dominates the scene. Although 82% of the crude oil that passes through Hormuz goes to Asia (China, India, Japan), oil is a global market. If there is a lack of supply in Asia, those countries will bid for the crude oil available in other regions, making the barrel more expensive for everyone.
This has an immediate effect on Europe due to the “financialization” of energy. Gas and oil they have stopped being simple commodities to become financial assets that operate with high-speed algorithms. The volatility is such that “an early morning headline about Iran can alter the price of heating in Berlin before dawn.”
The European Achilles heel
The situation is especially delicate for the Old Continent. Europe is experiencing a “painful déjà vu“: fleeing from Russian dependence, has fallen into dependence on gas that arrives by ship (LNG). European gas reserves are at worrying lows (44% at the end of January) and vulnerability is maximum.
This is where Hormuz plays a critical role beyond oil. As we have detailed in Xatakathe European Union looks to Qatar as a vital alternative for its gas supply, but “military tensions between the US and Iran in the Strait of Hormuz put that route at risk.” If the strait is closed, not only oil to Asia is blocked, but also the Qatari liquefied natural gas that Europe desperately needs to refill its warehouses for next winter.
The short-term horizon is bleak. According to an estimate by Eurasia Group collected by OilPricethere is a 65% chance that the United States will launch a military strike against Iran in April if the current talks fail. For its part, Iran does not seem willing to budge on its rhetoric. Admiral Alireza Tangsiri, commander of the Revolutionary Guard Navy, declared bluntly on state television: “We are ready to close the strait when our authorities order it.”
Without Plan B: why turning off the tap would be economic suicide
It is essential to add an often overlooked expert nuance: closing Hormuz completely would be a double-edged sword, or even “economic suicide” for Iran. JPMorgan analyst, cited by Reuters, They point out that the Iranian economy depends on free transit through that route. “Cutting the Strait of Hormuz would be counterproductive for Iran’s relationship with its only current oil client: China,” the experts explain.
Are there alternatives if the closure becomes total? Few and limited.
- Saudi Arabia operates the East-West pipeline.
- The United Arab Emirates has a connection to Fujairah, in the Gulf of Oman.
- However, the EIA estimates that these alternative routes They only have the capacity to divert about 2.6 million barrels per day of the 20 million that normally transit. The world has no real “Plan B” to replace Hormuz.
The Strait of Hormuz has ceased to be just a strategic line on military maps and has become the thermometer of global fear. What happened this week is a warning: the road has been “partially” closed and the market has trembled.
If the diplomacy now being woven in Geneva fails and that 65% probability of war materializes, the 13% increase in oil prices that we have seen this year could seem like a minor anecdote. The stability of our electricity bill, paradoxically, is being played out today in distant coordinates, between speedboats and destroyers, in the hot waters of the Middle East.
Image | Goran_tek-es and freepik
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