Israel, US strike Iran: Impact on oil, energy flow via Strait of Hormuz, Pg13

Key Highlights:

• Israel and the US launched military strikes in Iran on Saturday, leading to potential disruption of oil flow via the Strait of Hormuz.
• Iran has reportedly moved to block the Strait of Hormuz, a critical chokepoint for global oil and gas flows, though no formal announcement has been made.
• Oil prices previously hit a seven-month high on Friday due to stalled US-Iran talks and increased US military presence.
• India, a major oil importer, faces a potential increase of $2 billion in its annual oil import bill for every $1 increase in oil prices.

Detailed Insights:

• The apprehension that the row could choke oil supplies from the wider Gulf region, which accounts for the lion’s share in global oil exports, is the reason why oil markets appeared jittery.
• The Strait of Hormuz is the world’s most important oil transit chokepoint, handling approximately one-fifth of global liquid petroleum consumption and global LNG trade.
• Roughly 15 million barrels of crude and 20% of global LNG volumes pass through the Strait daily; over 40% of crude oil imported by India transits this route.
• A full blockade of the Strait of Hormuz could alienate key allies like China and sour relations with Oman, while the US believes that Saudi Arabia can offset any supply disruptions.
• Iran has repeatedly threatened to blockade the Strait and strike tankers, with additional threats from Yemen against tankers transiting the Bab el-Mandeb.
• The US interprets previous confrontations as low-risk, but there are concerns that Tehran may respond more forcefully if it feels its survival is at stake, potentially targeting the regional energy industry.

Key Concepts Involved:

• Strait of Hormuz: A narrow waterway between Iran and Oman connecting the Persian Gulf with the Gulf of Oman and the Arabian Sea, critical for global oil and gas flows.
• LNG (Liquefied Natural Gas): Natural gas that has been cooled to liquid form for ease and safety of non-pressurized storage or transport.
• Bab el-Mandeb: A strait connecting the Red Sea to the Gulf of Aden and the Arabian Sea, another important maritime chokepoint for global energy flows.