Impact of Iran Closing the Strait of Hormuz on Global Markets
The Strait of Hormuz is one of the most important oil transit routes in the world. About 20% of global oil supply passes through this narrow waterway. If Iran decides to close it, oil prices could skyrocket above $200 per barrel, according to Macquarie Commodities Strategy Head Marcus Garvey. While this is not the expected scenario, even a temporary disruption could cause major economic consequences.
Who Benefits?
Companies involved in oil production and energy supply would likely see higher profits due to rising oil prices. Some stocks that could benefit include:
- Exxon Mobil (XOM) and Chevron (CVX) in the U.S.
- Shell (SHEL) and BP (BP) in Europe
- Oilfield service providers like Schlumberger (SLB) and Halliburton (HAL), which support drilling operations
Who Suffers?
Industries that rely on oil for production and transportation would struggle with higher costs. Some of the most affected sectors include:
- Airlines (Delta Air Lines, United Airlines, Lufthansa)
- Automakers (Volkswagen, Ford, Tesla)
- Shipping companies (Maersk, FedEx, UPS)
- Chemical producers (BASF, Dow Inc.)
Likelihood of Closure
Iran has threatened to close the Strait of Hormuz multiple times, but it has never fully blocked it. The last major disruption occurred during the Iran-Iraq War (1980-1988), when both sides attacked oil tankers. More recently, in 2019, ships were attacked near the strait, raising concerns about security. Experts believe a full closure is unlikely, as it would also hurt Iran’s economy and provoke military retaliation.
Conclusion
If Iran closes the Strait of Hormuz, oil prices would surge, benefiting energy companies while hurting industries dependent on oil. However, history suggests that a full blockade is not likely, though tensions in the region remain high. Investors should watch oil markets closely as geopolitical risks evolve.
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