Iranian Parliament Votes to Close the Straits of Hormuz

What Happened?

On Sunday Iranian lawmakers voted to close the Straits of Hormuz, which is a strategic naval chokepoint in the Persian Gulf. About one-fifth of the world’s oil and liquified natural gas pass through the straights each year. While the vote in Iran’s parliament was overwhelming, the final decision will rest with Iran’s Supreme Leader, who has yet to say whether or not he will enforce the vote.

The Eurasia Group sent a message to its members on Sunday saying, ‘A move by Iran against the strait would almost certainly trigger a significant military response’ from the United States. 

Why it Matters

Because the Strait of Hormuz lies within Iran’s territorial waters, the Iranian Navy could place mines in those waters or harass commercial ships passing through the area, which Iran has done before. If Iran did close or attempt to close the strait, it could disrupt commercial traffic carrying petroleum and natural gas and trigger a global price increase in the energy market. 

In addition to the potential market repercussions of closing the strait, such a move would almost certainly result in additional military action by the United States against Iran to re-open the strait or to keep commercial vessels safe from Iranian attack. Though Iran’s Navy is much smaller, it does possess a number of high-speed craft capable of carrying explosives which could damage or sink commercial vessels, and which could also be used against the U.S. Navy.

Even if Iran doesn’t physically block the strait or attack any ships, their threats to do so could force many commercial carriers to re-think operations in the area. That in turn could also cause disruptions to the flow of oil and gas which could trigger price increases across the globe. The price of oil was $77 dollars a barrel on Friday, but Bjarne Schieldrop, chief commodities analyst at SEB Research, said, ‘Above $80 now looks very plausible’ on Monday. Other analysts have warned that a prolonged disruption could push prices as high as $100 per barrel. 

Saudi Arabia and Qatar could also be severely impacted by a closure of the Straits of Hormuz, and it is unlikely they would simply watch and take no action as their most valuable exports were unable to reach their destinations. Saudi Arabia and Iran are long time regional rivals, and a closure of the straits might push the Saudis to take military action against Iran, which would mean at that point the Middle East would be in full-fledged regional war.

How it Affects You

If Iran does close or attempt to close the Straits of Hormuz, it could have global economic implications and regional military repercussions. An increase in energy prices tends to have a ripple effect across many segments of the economy, which could mean higher prices for consumers across a range of goods and services.