The closure of the strategic chokepoint off the coast of Iran will have long-term global implications, even once ships resume travel there, a Fletcher School expert explains
Ships carrying oil, natural gas, and other valuable commodities have not been able to pass through the Strait of Hormuz recently, causing price spikes and shortages. Photo: Adobe Stock
Oil and other energy supply disruptions have been roiling the world, causing price hikes and fuel shortages, since the Strait of Hormuz was effectively closed by Iran in response to Feb. 28 attacks by the United States and Israel.
Pressure is building to end Iran’s chokehold and re-open the strategic shipping lane, but even once trade through those waters resumes, the conflict will have long-term effects, says Rockford Weitz, F03, FG08, a professor of the practice at The Fletcher School and director of its Maritime Studies Program.
“Resumption of commercial shipping in the Strait of Hormuz … doesn’t mean automatically everything’s fine,” he says. “I think what we’re going to see is, in the long run, less reliance on the Gulf Cooperation Council countries passing their cargoes through the Strait of Hormuz.”
That’s just one of the long-term impacts Weitz foresees because of the closure of the strait, which links the Persian Gulf and the Gulf of Oman and is used to transport oil, natural gas, and other valuable commodities. Here are some of his key takeaways.
Supply chain routes will be diversified.
To reduce reliance on the Strait of Hormuz and try to create a more resilient supply chain, countries will invest in alternatives, Weitz says.
Before the strait was closed, about 20 million barrels of crude oil were passing through it daily, he says. Now, nearly half of what would have been shipped is instead being transported daily through pipelines across Saudi Arabia and the United Arab Emirates. But the rest of the oil is not being delivered.
For natural gas, the situation is even trickier. “There are no natural gas pipelines yet that offer an alternative” to shipping in that region, he says. “I think that will change over the long term.”
Natural gas prices have risen dramatically for Asia and Europe due to the current conflict, while the United States “is almost unique among the large economies for not having a natural gas pricing problem and shortage right now,” because it produces so much natural gas itself, Weitz says. The U.S. has increased exports of liquefied natural gas, especially to Europe and Asia, he says, “but it takes time to build those facilities, and we just don’t have enough to compensate for the blockages.”
The closure of the Strait of Hormuz, which is bordered by Iran and Oman at the narrowest portion, has spurred interest in alternative routes for global trade. Illustration: Shutterstock
It may take three to five years to repair the natural gas export facility in Qatar, which is the world's largest and has lost about 17% of its capability due to recent drone and missile strikes by Iran. In the meantime, natural gas producers in North America will likely increase their share of liquefied natural gas going to Asia and Europe, as the U.S. has already done, Weitz says.
“I think that will probably be a permanent feature,” he says. “The U.S. will be, I think, a long-term beneficiary of this disruption.”
In addition, Iran’s chokehold on the Strait of Hormuz may be increasing the business argument for shipping by way of the Arctic, which is a harsh environment and requires specialized vessels and a costly icebreaker escort, but may start looking more attractive, Weitz says.
Regional and global alliances will shift.
The conflict in the region may have contributed to the United Arab Emirates’ decision to leave OPEC, which was announced on April 28, Weitz says. The move deprives the oil cartel of its third-largest producer and weakens its ability to influence global oil supplies and prices.
The UAE “is giving itself the liberty to increase its own oil production as needed separate from whatever OPEC decides to do,” Weitz says. They “have the pipelines to be able to do it and they’re probably going to build out more pipelines.”
The UAE was on the receiving end of more drone and missile attacks from Iran than any other country, including Israel, between February and April, Weitz says. “I think that was a surprise to them, and I think the Gulf Cooperation Council countries in general were surprised at how much Iran struck them because they’re not formal belligerents in this war,” although they do host U.S. military bases or provide access to military facilities, he says.
“I think what we’re going to see is, in the long run, less reliance on the Gulf Cooperation Council countries passing their cargoes through the Strait of Hormuz.”
Weitz also sees global political alliances shifting. For example, he points out that Ukrainian President Volodymyr Zelensky in late March signed 10-year security agreements with Saudi Arabia, UAE, and Qatar, in which Ukraine offered its drone expertise to the Gulf Arab states.
While the current conflict in the Middle East is often framed as between the United States and Israel, on one side, and Iran on the other, he says, “It’s really U.S., Israel, and Ukraine versus Iran and Russia, because Russia has been a major purchaser of Iranian drone technology to use against the Ukrainians.”
Agriculture and the environment have been hit hard, but green power may get a boost.
One of the biggest irreversible impacts of the current shipping disruption has been on agriculture, Weitz says. Farming is heavily dependent on nitrogen fertilizers that are byproducts of petroleum and natural gas refining; it’s also dependent on fuel and financial credit. All three of those have become more expensive due to the conflict.
“Farmers have to borrow from banks to buy seeds and to purchase fuel and fertilizer for their crops,” he says. Because it’s planting season now in much of the world, the increase in fertilizer and fuel prices and the cost of credit has hit the agriculture industry hard and will likely increase food prices globally in the future, he says.
In addition, recent actions in the Middle East have unleashed pollutants that threaten agriculture, water, and people’s health and may have lingering effects for decades.
“Anytime you’re dealing with crude oil, whether it is an attack on a tanker or an attack on a pipeline, the ecological price you pay is significant,” Weitz says.
But, on a positive front, the fuel price spikes and shortages might be an incentive for increased investment in green energy, he says.
The International Maritime Organization, for example, has for years been working on a Net-Zero Framework for carbon emissions from shipping. That framework faces stiff political opposition, but Weitz is “cautiously optimistic on the shipping industry being able to be the first mode of transportation to do large-scale experiments with alternative green fuels.”
He says countries like Saudi Arabia and the UAE are investing billions to provide green fuels to power ships, and the world’s two largest shipping container lines, Maersk and MSC, are also investing in building new ships, which suggests the industry is ready to change.
The closure of the Strait of Hormuz has only made such a transition more urgent. The shipping industry currently burns a byproduct of oil refining called bunker fuel, which is in short supply because of the reduction in refining due to the chokehold on the strait.
“The business case for alternative green fuels has gotten better because of this disruption in the Strait of Hormuz,” Weitz says.
