Will the Strait of Hormuz Be Closed? Iran-Israel Conflict Escalates, Oil Giants Issue Warnings

As the conflict between Israel and Iran continues to escalate, oil industry executives from companies such as ExxonMobil, TotalEnergies, and Shell issued warnings on Tuesday. They stated that further attacks on critical energy infrastructure could have severe consequences for global energy supply and prices.

Since Israel launched military strikes against Iran in the early hours of the 13th local time, the two countries have engaged in multiple rounds of retaliatory attacks. Currently, the Israel-Iran conflict has entered its sixth day, with tensions escalating.

In recent days, some oil and gas facilities on both sides have been attacked, although so far, critical energy infrastructure and crude oil flows have not been affected.

However, the possibility of a major supply disruption remains a major concern for the market, especially in the worst-case scenario where Iran might block the strategically vital Strait of Hormuz.

Shell CEO Wael Sawan said in a media interview during the Asia Energy Forum on Tuesday, "The last 96 hours have been very concerning... not just for the region, but more broadly, given the uncertainty and geopolitical instability we are seeing in the environment, the direction of the global energy system is also concerning."

He also stated, "How we respond to the current situation in the coming days and weeks is my top concern and that of the leadership team." Shell has significant operations in the Middle East, both in terms of operational assets and transportation.

French oil giant Total's CEO Patrick Pouyanné told the media that amid the Israel-Iran tensions, his top concern is the safety of employees in the region.

He pointed out that Total is the largest international oil company in the region, having started operations in Iraq 100 years ago and still operating in Iraq, Abu Dhabi, Qatar, and Saudi Arabia.

He also expressed hope that further attacks by both sides would not affect oil facilities, "because this could cause real problems, not just in terms of safety, hazards, and risks, but also for the global energy market."

US oil giant ExxonMobil's CEO Darren Woods recently shared his views on the impact of the Israel-Iran conflict on the oil market in a media interview. He stated that the global oil market has sufficient supply to withstand any supply disruptions from Iranian exports.

However, he added, "If export infrastructure or shipping through the Strait of Hormuz is affected, that would cause bigger problems."

According to Andy Lipow, president of consulting firm Lipow Oil Associates, Iran produces 3.3 million barrels of crude oil per day and exports about 1.6 million barrels per day, accounting for less than 2% of global total demand.

Lipow said that the market's loss of Iranian oil could drive up oil prices by $7.5 per barrel, but if oil exports through the Strait of Hormuz are affected, prices could climb to $100.

Amjad Bseisu, CEO of UK oil and gas producer EnQuest, referred to 2025 as a "year of turbulence." He told the media, "Something different happens almost every day, but clearly, the war between Israel and Iran has escalated again."

He also said, "The sooner we end this terrible conflict, the better it will be for the entire market, although I do believe that the market is well-supplied in the short to medium term."

International oil prices surged more than 4% on Tuesday, extending recent gains, as the Israel-Iran conflict continues with no end in sight, despite the fact that major oil and gas infrastructure and trade have so far not been substantially affected.

Oil traders consider this Middle East conflict the most significant geopolitical event since the outbreak of the Russia-Ukraine war in 2022.

Will the Strait of Hormuz be closed?

The Strait of Hormuz, a sea passage connecting the Persian Gulf and the Indian Ocean and the only waterway into the Persian Gulf, is considered one of the world's most important oil chokepoints. Crude oil from major oil-producing countries such as Saudi Arabia, Qatar, Kuwait, and Iran must be transported through the Strait of Hormuz to destinations around the world, making it a critical artery for the global economy.

According to data from the US Energy Information Administration (EIA), the average oil flow through the Strait of Hormuz in 2023 was 20.9 million barrels per day, accounting for about 20% of global oil consumption.

If tankers are unable to pass through the Strait of Hormuz, even temporarily, it could lead to a significant increase in global energy prices, a surge in transportation costs, and severe supply delays.

As the Israel-Iran conflict intensifies, global shipping companies are beginning to choose to avoid the Strait of Hormuz.

The Baltic and International Maritime Council (BIMCO), one of the world's largest shipping associations, said recently that the large-scale conflict between Israel and Iran has made the entire shipping industry uneasy, with many vessels already choosing to avoid the Strait of Hormuz and the number of vessels passing through the Strait declining.

S&P Global Market Intelligence also said on the 17th that the threat of a large-scale conflict between Israel and Iran is "sufficient to cause serious disruptions to shipping," and there are signs that some shipping companies are beginning to avoid passing through the Strait of Hormuz.

Iranian officials have hinted at the possibility of blocking the Strait of Hormuz. However, market observers remain skeptical, suggesting that operationally, Iran may not be able to do so.

JPMorgan Chase recently assessed that the risk of the strait being blocked remains extremely low, primarily because such an event has never occurred

. Morgan Stanley stated in a June 16 report that despite Iran's threats to block the Strait of Hormuz, a complete closure of the strait is still a low-probability event