Why the Strait of Hormuz Is Critical for Global Oil and LNG Supply
How Strait of Hormuz Disruptions Could Affect India, Fuel Prices and the Global Economy
The
Strait of Hormuz is a narrow but extremely important maritime passage that
connects the Persian Gulf with the Gulf of Oman and the Arabian Sea. Iran lies
to the north, while Oman and the United Arab Emirates (UAE) are located to the
south.
The
Strait of Hormuz is one of the world's most important energy chokepoints
because a huge volume of crude oil, petroleum products and liquefied natural
gas (LNG) passes through it. In the first half of 2025, around 20.9 million
barrels of oil per day moved through the Strait of Hormuz, equivalent to about
one-fifth of global petroleum liquids consumption.
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| Strait of Hormuz Explained: Why This Critical Oil Route Matters for India, Oil Prices and the Global Economy |
Strait
of Hormuz: Key Facts
- Length: Approximately 167 kilometres
- Narrowest width: Approximately 33
kilometres
- Location: Between Iran and Oman
- Connects: The Persian Gulf with the
Gulf of Oman and the Arabian Sea
- Main importance: Global oil and LNG
transportation
Although
the Strait of Hormuz is relatively narrow, it is deep and wide enough to
accommodate some of the world's largest crude oil tankers. This makes it a
vital route for major energy producers and consumers.
Why
Is the Strait of Hormuz So Important?
A
Critical Route for Global Energy Trade
Saudi
Arabia, Iraq, the UAE, Kuwait, Qatar and Iran are among the major energy
producers whose exports depend heavily on maritime routes through the Persian
Gulf.
According
to the U.S. Energy Information Administration (EIA), total oil flows through
the Strait of Hormuz averaged 20.9 million barrels per day in the first half of
2025. About 89% of the crude oil and condensate moving through the strait went
to Asian markets. China, India, Japan and South Korea were the biggest
destinations.
This
means that any prolonged disruption can quickly affect global crude oil prices,
freight costs, insurance premiums and inflation.
Importance
for India
India
is particularly exposed to developments in the Gulf because it is one of the
world's largest oil-importing economies.
The
importance of Strait of Hormuz for India goes beyond crude oil. Asian countries
are also major destinations for LNG transported through the strait. EIA
estimates that more than 20% of global LNG trade passed through the Strait of
Hormuz in the first half of 2025, with Qatar accounting for most of the LNG
flows.
A
prolonged disruption can therefore affect India's crude oil costs, petroleum
prices, shipping expenses, inflation and the broader economy.
A
Major LNG Route
The
Strait of Hormuz is not only an oil route. It is also a crucial corridor for
LNG.
In
2024, around 20% of global LNG trade passed through the strait. Qatar exported
approximately 9.3 billion cubic feet per day (Bcf/d) of LNG through Hormuz,
while the UAE exported around 0.7 Bcf/d.
LNG
is natural gas that has been cooled to a very low temperature and converted
into liquid form. This reduces its volume dramatically, allowing it to be
transported efficiently by specialised LNG carriers. At the destination, it is
converted back into gas for use in electricity generation, industry, heating
and cooking.
Hormuz
and Global Food and Fertiliser Supply
The
importance of Strait of Hormuz extends beyond energy.
Natural
gas is a major raw material used in the production of many fertilisers. As a
result, disruptions to gas supplies from the Gulf can also affect fertiliser
production and prices.
The
region is also an important source of energy and other commodities for
countries across Asia, Africa and other parts of the world. Any sustained
disruption can therefore create pressure across several interconnected supply
chains.
Why
Is the Strait a Geopolitical Flashpoint?
The
Strait of Hormuz is strategically sensitive because of its geography.
At
its narrowest point, the shipping lanes pass through territorial waters
belonging to Iran and Oman. Under international maritime law, coastal states
generally have sovereignty over territorial seas extending up to 12 nautical
miles from their coasts.
Because
the waterway is narrow and carries a very large volume of commercial traffic,
military tensions can quickly create risks for civilian shipping.
Iran
has significant military capabilities in and around the Gulf, including drones,
missiles, fast attack craft and other systems that can threaten commercial
vessels during a major conflict.
Even
when a vessel is not physically attacked, the perception of risk can be enough
to raise insurance and freight costs and discourage shipping companies from
using the route.
What
Happens When Shipping Through Hormuz Is Disrupted?
A
disruption does not necessarily mean that every tanker stops moving
immediately.
Instead,
shipping companies may:
- avoid the route altogether;
- demand much higher insurance
premiums;
- charge higher freight rates;
- delay voyages;
- seek alternative supply routes; or
- reduce the number of vessels entering
the region.
This
can push up the cost of transporting oil even when the physical shortage of
crude is initially limited.
The
economic impact can therefore spread well beyond the Gulf. Higher crude prices
can increase the cost of petrol, diesel, aviation fuel, transportation,
manufacturing and several consumer goods.
Can
Gulf Countries Bypass the Strait of Hormuz?
Some
Gulf producers have built pipelines that can move part of their oil exports
without passing through Hormuz.
Saudi
Arabia operates the East-West crude oil pipeline, while the UAE has a pipeline
connecting its oil-producing areas with the port of Fujairah on the Gulf of
Oman.
According
to the EIA, pipelines in Saudi Arabia, the UAE and Iran provide alternative
routes, but their combined available capacity is far smaller than the volumes
normally transported through the Strait of Hormuz. In the first half of 2025,
Saudi Arabia and the UAE together had about 4.7 million barrels per day of
capacity that could bypass the strait.
Therefore,
alternative pipelines can reduce the impact of a disruption, but they cannot
completely replace Hormuz.
What
Does a Hormuz Disruption Mean for Oil Prices?
The
Strait of Hormuz is often described as an oil chokepoint because there are
limited alternatives for moving such large volumes of energy.
If
shipping is disrupted for a short period, oil markets may mainly respond
through a higher geopolitical risk premium. But if the disruption continues for
weeks or months, the market can face an actual supply shortage.
That
can push Brent crude prices higher and increase fuel costs around the world.
The
impact can be particularly severe for Asian economies because most of the oil
and LNG passing through Hormuz is ultimately destined for Asian markets.
What
Is the Current Situation in August 2026?
The
situation has again become highly serious.
After
the conflict that began in February 2026, shipping through the Strait of Hormuz
was severely disrupted. Traffic increased temporarily following a June
understanding between the United States and Iran, but tensions have risen
again.
As
of August 16-17, 2026, shipping activity has fallen sharply following attacks
involving commercial tankers. Kpler tracking data showed only five commodity
vessels passing through the strait on Saturday, August 15, and none recorded on
Sunday, compared with 31 during the previous weekend. Before the war, more than
130 ships were passing through the waterway each day.
The
renewed disruption is once again raising concerns about oil supplies, freight
rates and energy prices. Brent crude was around $89.28 per barrel on August 17,
according to Reuters, as markets assessed the risk of prolonged disruption and
stalled U.S.-Iran talks.
This
latest development makes the Strait of Hormuz even more important to watch for
India and the global economy.
Why
the Strait Matters to the World
The
Strait of Hormuz is much more than a narrow waterway between Iran and Oman. It
is a critical link connecting some of the world's biggest energy producers with
major consuming economies.
Any
prolonged disruption can affect:
- crude oil prices;
- petrol and diesel prices;
- LNG supplies;
- shipping and insurance costs;
- inflation;
- fertiliser prices;
- global trade; and
- economic growth.
For
India, the Strait of Hormuz is particularly important because the country
remains heavily dependent on imported energy and is one of the major Asian
destinations for oil and LNG transported through the region.
As
a result, developments around Strait of Hormuz can have a direct or indirect
impact on India's fuel prices, inflation, the rupee, the stock market and the
wider economy. The Strait of Hormuz will therefore remain one of the most
closely watched geopolitical and energy corridors in the world.
Read more story
Strait of Hormuz Crisis: How Rising Oil Prices Could Impact India
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