How Close Did Iran Come to Shutting Strait of Hormuz?

It appears that Iran was not very close to trying to block shipping through the Strait of Hormuz. 

That’s what Edward L. Morse, Senior Advisor and Commodities Strategist at Hartree Partners LP, and previously the Global Head of Commodity Research at Citi Group, told Rigzone in an exclusive interview recently.

“Iran’s position in the Middle East and in the global market has deteriorated significantly since the October 7 Hamas attacks in Southern Israel, which Iran with no question helped to orchestrate,” Morse said.

“It has lost effective utility of all of its external proxies. It has lost its position in a number of countries almost completely … It has lost its air defense completely. And it … [has] seen its vulnerability to its control over the domestic economy, including the availability of natural gas for power generation and industry as summer demand was starting to surge,” he added.

“On top of that the combination of Israeli and particularly U.S. attacks have reduced the possibility of significant assistance from the two outside powers tha[t]… have been their main global backers – Russia and China,” he continued.

“The former has limited ability to provide arms given its situation vis-à-vis Ukraine while the later has absolutely no interest in seeing a disruption of critical supplies through the Strait of Hormuz,” Morse went on to state.

“In short, a shutting of flows through the Strait would actually be an existential threat to Iran, and a threat to do that is not only not a critical element of its national security, it is a direct danger to its existence,” he highlighted.

When asked how high oil prices would have climbed if Iran had shut the Strait, Morse told Rigzone that it is close to impossible to see how much oil prices would have increased had Iran shut the Strait or if Iran succeeded in shutting the Strait in the near future. 

“Depending on the level of mining of the Strait required (which would be observed and interrupted in all likelihood by the U.S. and with the support of others who need the Strait to remain open), it could be an up to three month operation in the worst case,” Morse warned.

“Of the ~21 million barrels per day of crude and product regularly flowing through the Strait, alternative utilization of pipes from the East to West Coasts of Saudi Arabia and through Fujairah in the UAE could divert up to eight million barrels per day of flows,” he added.

“You can add another ~500,000 barrels per day if the Iraqi pipeline through Turkey to the Med were re-opened. Almost all of that capacity is apparently available, but that would still leave a gap of 12 million barrels per day, well above the ability of the market to balance without high prices needed to destroy demand,” Morse continued.

It’s fair to say a surge in prices would probably be well above $100 per barrel, Morse told Rigzone.

“Would it be $120 or $130 initially? Whatever it would be, that number would probably be higher than what might be required – as was the case in July 2008 when Brent hit ~$147 a barrel,” he noted.

“But that was when global inventories were exceptionally high. Inevitably [the] International Energy Agency and other strategic stocks would be released, including those of China, which are the highest in the world given that the government controls both its own and all commercial stocks,” he added.

“But that incremental ~four million barrels per day still would leave an eight million barrel per day gap. How long would high prices last? Perhaps shorter than the three months estimated to clear the Strait of sunk ships and existing mines,” he continued.

Morse told Rigzone that Iran would not have the power to impede the re-opening of the Strait. 

“Russia would not be on Iran’s side given its relations with the Gulf Cooperation Council (GCC) countries and its own desire to be able to sell crude and products as needed into the region,” he noted.

“China would also regard the re-opening as a high priority security matter and would likely be engaged with the U.S., UK and other NATO countries, as well as the GCC in a re-opening,” he added.

Morse went on to tell Rigzone that it is highly unlikely that Tehran would have an interest in shutting the Strait at any time in 2025.

Rigzone has contacted the Iranian Ministry of Foreign Affairs, Israel’s Ministry of Foreign Affairs Spokesperson, Oren Marmorstein, the Department of Information and Press of the Russian Ministry of Foreign Affairs, the UK Foreign, Commonwealth & Development Office, the White House, the State Council of the People’s Republic of China, the International Energy Agency, the Gulf Cooperation Council General Secretariat, and NATO for comment on Morse’s statements. At the time of writing, none of the above have responded to Rigzone.

American Enterprise Institute, Baker Institute View

In a separate exclusive interview, Michael Rubin, a Senior Fellow at the American Enterprise Institute (AEI), told Rigzone that Iran does not have the capacity to close the Strait of Hormuz for more than a day or so.

“Not only could any Iranian assets involved be eliminated relatively easily, but Iran also depends on the Strait to export its own oil and import gasoline,” he said.

When asked how high oil prices would have climbed if Iran had shut the Strait, Rubin told Rigzone that the world isn’t as dependent upon the Persian Gulf as it was decades ago.

“There are other fields – in North and South America, Europe, and Africa that can pick up some slack,” he pointed out.

“Maybe prices would have spiked $10 or $15, but they would have just as quickly come down. But, Iranian closure of the Strait is more a hypothetical than a realistic event,” he added.

When asked if Iran is likely to shut the Strait in the second half of the year, Rubin told Rigzone this is “unlikely”.

“The purpose of Iranian action is not to actually fulfill the bluster but rather pressure the West by raising the cost of insurance,” he added.

Another Senior Fellow at the AEI, Ben Zycher, told Rigzone that Iran closing the Strait “was never going to happen”. 

When asked how high oil prices would have climbed if Iran had shut the Strait, Zycher said, “probably on the order of $100, but very temporarily”. He believes Iran is not likely to shut the Strait in the second half of the year.

Kristian Coates Ulrichsen, a fellow for the Middle East at Rice University’s Baker Institute for Public Policy, and co-director of the Middle East Energy Roundtable, told Rigzone in a separate exclusive interview that he doesn’t think Iran ever seriously considered closing the Strait of Hormuz.

“For a start, it would have impacted their own energy exports from Kharg. In addition, since the waterway is shared with Oman, and the shipping lane through Hormuz is mostly in Omani water, it was not Iran’s decision alone and would have involved hostile action against a friendly and, critically, a neutral neighbor,” he added.

“Iranian officials and politicians have threatened to close the Strait for decades, ever since the 1980s, but to my knowledge the leadership has never acted on those threats, which I think are more for public and political consumption domestically,” he continued.

“Of course, Iran can try to harass and disrupt shipping short of closing the Strait, and we did see a rise in freight rates and insurance costs during the conflict, which is something that does need to be borne in mind,” Ulrichsen went on to note.

Maritime Intelligence Company View

Corey Ranslem, the CEO of Dryad Global, a maritime intelligence company, told Rigzone in another exclusive interview that the company doesn’t believe that Iran came close to shutting down the Strait recently. 

“Their parliament voted to close the Straits, but that was more likely a ‘ceremonial’ vote,” Ranslem said.

“Shutting down the Straits would cause economic issues for Iran as well as the rest of the Middle East and would have potentially expanded the conflict into the maritime realm,” he added.

“During the U.S. attacks there were numerous military vessels within this region that would most likely have prevented Iran from fully closing the Straits as well,” he continued.

“We do expect Iran to continue the satellite navigation system interference along with their normal harassment of vessels via radio and suspicious approaches by their Revolutionary Guard,” Ranslem warned.

The Dryad CEO went on to tell Rigzone that, right now, it isn’t likely they will shut down the Strait under the current geopolitics. Ranslem pointed out, however, that geopolitics are rapidly changing globally, “so anything is possible”. 

Rigzone has contacted the Iranian Ministry of Foreign Affairs for comment on Rubin, Zycher, Ulrichsen, and Ranslem’s statements. Rigzone has also contacted the Foreign Ministry of Oman for comment on Ulrichsen’s statements and the White House for comment on Ranslem’s statements. At the time of writing, none of the above have responded to Rigzone.

To contact the author, email andreas.exarheas@rigzone.com