Why are disruptions in the Strait of Hormuz likely to affect oil prices around the world?

Disruptions in the Strait of Hormuz significantly impact global oil prices because the strait serves as a vital chokepoint for the world's energy supply. Approximately 25 percent of the world’s maritime crude oil trade passes through this narrow channel daily, making it the primary maritime gateway for major producers like Iran, Iraq, Kuwait, Saudi Arabia, and the United Arab Emirates.12

The strait is uniquely difficult to bypass because there are no logistically viable alternatives for the massive volumes of oil exported by these nations. While some pipelines exist—such as those allowing Saudi Arabia and the UAE to divert a portion of their exports to the Red Sea or the Gulf of Oman—they cannot replace the capacity of sea-based tanker shipments. When transit is threatened or restricted, markets react to the immediate risk of supply shortages, causing global prices to surge as traders account for the potential loss of millions of barrels of daily supply.234