Expert comment: what could the potential closure of the Strait of Hormuz mean for global supply chains?

“While a fragile ceasefire is now in place in the Middle East, there is still concern about global maritime traffic through the Strait of Hormuz, as the Iranian parliament has voted to close this. What could this mean for global supply chains?

“This narrow maritime channel between the Persian Gulf and the Gulf of Oman is crucial for global energy supplies. Especially for Middle Eastern countries who are major oil suppliers (Kuwait, Bahrain, Qatar and UAE) and totally rely on this channel as their only access to open waters for shipping energy supplies. Shutting it will cause a massive strategic headache for supplying global energy trade. 

“About 20% of global oil, petroleum and liquified natural gas heads through the Strait each year. So, the potential of anything happening in the immediate term will see ripples through oil prices.  There has already been nervous market trading causing oil price spiking. 

“When the global demand outstrips supply, countries in the Middle East increase their output, assuming it’s with OPEC (Organization of the Petroleum Exporting Countries) rules. However, supplying the oil will be the problem if the Strait of Hormuz is closed to global shipping trade. If demand for global energy is to be met longer term, other suppliers will need to increase their output.”