The Strait of Hormuz Crisis: How the Iran–Israel–U.S. Conflict Could Shake the Global Economy

Iran-Israel-U.S Crisis and the Strait of Hormuz Power: Why a Narrowed Sea Can Rock the World Economy.

Introduction

The modern geopolitics is not that of fighting armies, missiles and fighter jets only. Geography itself is made in most instances one of the strongest strategic weapons. Some places on the world map are so important economically and militarily that possession of such strategic points can affect the global politics and the international markets.

Strait of Hormuz may be considered one of such places, being a narrow sea route, lying between Iran and Oman. Though it is not large, this waterway now occupies one of the most strategically significant places in world economy.

The relationship between Israel, Iran, and the United States is strained, and many times it has resulted in the concern that this passage would become a major point of contention in the international conflict. To understand why such a narrow channel is so popular, it is necessary to take a closer look at its economic significance, its role in the existing geopolitical frictions and what would happen in case the latter was ever shut down.

The Strait of Hormuz The Economic Throat of the World.

Analysts refer to the Strait of Hormuz as the economic throat of the world due to the sheer volume of energy passing through it on a daily basis. Although the strait is merely forty kilometers wide at its lowest point, it acts as the major passageway to exporting oil of the Persian Gulf to the rest of the globe.

This is a waterway that links the gulf of Oman to the Persian Gulf through which the oil tankers of major oil producing nations can access the international markets. Countries like Saudi Arabia, Iraq, Kuwait, Qatar, and the United Arab Emirates are some of the countries that are dependent on this route to ship their petroleum.

According to the estimates given by energy analysts, it is estimated that about the fifth of all the global oil supply passes through the Strait of Hormuz. This is a narrow passage through which over twenty million barrels of oil flow daily. These deliveries drive the transportation infrastructure of the world, industrial output, and the economy of Asia, Europe, and North America.

Since a big percentage of the entire energy trade in the world is based on this single route, any form of a temporary malfunction can lead to an instantaneous wave within the global markets. The military action or blockade in this region would not only impact the countries of Middle East but also it will have shockwave impacts on the entire global economy.

Recent Iran, Israel and the United States Tensions.

The Strait of Hormuz geopolitical conflicts are directly linked to the overall conflict between Iran and its neighbors. During the last twenty years, there have been recurrent clashes between Tehran and the Western states over the issue of Iranian nuclear program, influences in the region, and military operations.

This has raised the concern of the United States and Israel that there is a possibility of Iran developing a capability of nuclear weaponry whereas the Iranian leaders claim that they want to use their nuclear program to provide civilian services. These conflicts have led to sanctions, diplomatic crises, and the military escalations in the region on a periodical basis.

Iran has been warning severally that in case it is directly attacked militarily, it might retaliate by interrupting shipping in Strait of Hormuz. The geographical position of the strait gives Iran a geographical edge which might enable it to pose a threat to international trade routes in case of a conflict as it occupies part of the Iranian territorial waters.

Though numerous dramatic scenarios are spread in the sphere of political commentary and social media, it should be mentioned that the information about certain events like the death of the Supreme Leader of Iran Ali Khamenei or a massive joint military attack of Israel and the United States has not been verified by the reliable international press as yet. Nevertheless, such hypothetical scenarios are often discussed by analysts to depict the rate at which the tension in the region may occur.

Economic Impact of Strait Closure on the World.

When the Strait of Hormuz has ever been closed or seriously interfered with the effects on the economy would have been sudden and drastic. Since world oil markets rely on consistent chains of supply, any threat of disturbance tend to lead to high prices occurring at a high rate.

The price of fuel in most of the countries would increase significantly as a result of shortages in supply and panic in the energy markets. Economists tend to estimate that a big shock in the strait may lead to a catastrophic increase in oil prices in the matter of days, which will impact the transportation, electricity generation and industrial activity globally.

Mega economies that are oil importers (India, China, and Japan) are highly reliant on oil imports in the Middle East. Disruption may jeopardize energy security in such countries and slack economic growth.

Countries that depend on imported fuel like Pakistan and Bangladesh may experience a great shortage of fuel and increased inflation. The effects would reach much further than the Middle East in a globalized economy where the cost of energy is a price determinant in almost all the industries.

The Geopolitical Weapon of Oil: History Lessons.

It is not a new idea to use oil supply as a political weapon. A well-known historical illustration of this was in the 1973 Oil Crisis when a number of Arab-based oil producers limited oil exports due to Western backing of Israel in the Yom Kippur War.

This move caused an energy crisis around the world causing fuel shortage, recessionary situation, and significant policy reforms in most economies. Governments started allocating more funds towards energy security and strategic petroleum reserves as a way of safeguarding themselves against the future supply interruptions.

The other historical circumstance that related to the Strait of Hormuz was the Iran-Iraq War in 1980s. In this conflict, the two parties attacked the oil tankers and this turned out to be the Tanker War as it was dubbed by the two parties and there was the fear that this could lead to the complete closing of the strait. But the leader of Iran Ruhollah Khomeini ended up deciding against closing the waterway altogether.

These historical events show that energy supply lines may turn into the potent instruments of the geopolitical struggle.

Possible Future Scenarios

In the event that Iran, Israel and the United States develop into a major blow out, there are a number of possibilities that may arise. The first one is that drastic economic upheaval would compel the world giants to come in and force the involved sides to negotiate.

The international bodies and the great economies in such a situation may go ahead to facilitate a settlement to avert a lasting energy crisis. Energy-dependent countries might provide diplomatic pressure that would be a strong force in de-escalating.

The other possible situation would be a wider military conflict in case shipping routes were crippled. In case of a threat to the global oil supply, the large sea powers may seek to ensure that maritime routes are made safe by using international military actions aimed at safeguarding transportation of energy.

Either way, the Strait of Hormuz would continue being the centre of the focus in the world due to its essential role in the global economy.

Conclusion

The Strait of Hormuz is much more than a tiny passageway between two bodies of water. It is one of the most delicate strategic points of pressure in the world politics. The ability to control this passage may also determine the market of energy, the foreign policy, and even the military confrontation.

This is why the relationships between the governments, economists and security analysts around the world pay close attention to the tensions between Iran, Israel and the United States. Very little development in this region can influence not only Middle East politics but also stability of the entire world economical order.

The strategic significance of the Strait of Hormuz can enable one to understand why the situation in this region of the world draws such a high level of international interest.

Research Sources

U.S. Energy Information Administration.
https://www.eia.gov

Council on Foreign Relations -Global energy security.
https://www.cfr.org

The BBC News: Middle East and Energy Markets.
https://www.bbc.com/news

International Energy Agency.
https://www.iea.org

Brookings institute of Middle East Policy studies.
https://www.brookings.edu

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