Stories
Hormuz Dilemma: Neither Open Nor Closed, Driving Economic Uncertainty
- •The Strait of Hormuz is no longer a binary proposition; it's neither reliably open nor demonstrably closed, operating under contested and shifting conditions.
- •Shipping through Hormuz has not stopped completely, but observable traffic has significantly decreased, with recent daily counts falling into single digits compared to approximately 130 ships a day before the crisis.
- •A gap exists between official claims of oil transit and visible flows, indicating incomplete knowledge for governments, insurers, and traders, leading to conditional access for vessels.
- •The situation represents a contest over authority, with Iran asserting a central role in managing the strait and promoting a route along its coast, while the US supports challenging navigation arrangements.
- •For India, the crisis impacts benchmark prices, freight, insurance, and supply chains for LPG, LNG, and fertilizers, necessitating sustained diplomatic engagement and contingency planning beyond emergency oil purchases.
Key Questions Answered
Uncertainty in the Strait of Hormuz is driving up global oil prices, with Brent crude reaching $88 a barrel and West Texas Intermediate (WTI) crude rising to $82.45. Experts warn that if disruptions persist, crude oil prices could reach $150 to $200 per barrel. This situation is considered a direct risk to global supply chains and inflation stability.
India can secure its energy supply by diversifying its crude oil imports to include more countries not dependent on the Strait of Hormuz, increasing domestic production, reducing unnecessary imports, and focusing on domestic product use. The country could also negotiate directly with Iran to secure oil supplies and store crude oil within India, such as through agreements with companies like ADNOC.
The situation in the Strait of Hormuz could escalate into a wider regional conflict, with concerns that a US blockade could draw American forces into a prolonged struggle with Iran. Iran has warned that any hostile move in the Strait could trap adversaries in a "deadly vortex", and US intelligence suggests Iran can now close the Strait at will.
