Analysis Oil & Gas Fears for Strait of Hormuz oil gateway in Iran-Israel face-off By Eva Levesque October 8, 2024, 1:26 AM Hamad I Mohammed/Reuters A US military helicopter escorts a vessel in the Strait of Hormuz. The US has facilities at Al Udeid Air Base in Qatar Iran could close vital waterway 36% of seaborne oil passes through Consequences would be ‘significant’ The prospect of a sustained Iran-Israel conflict is raising concerns that Iran could respond by closing the Strait of Hormuz, the waterway critical to GCC oil and gas exports. Last month about 15 million barrels per day (bpd) of crude passed through the Strait of Hormuz, 36 percent of global seaborne oil exports, according to data from Kpler, the energy analysts. About one in 10 of the barrels was Iranian, as the Islamic Republic is currently exporting almost 2 million bpd, most of it to China. From the Arab side, only 20 to 25 percent of Gulf crude oil exports are routed outside the strait, through alternative pathways such as Oman, Saudi Arabia’s west coast facilities, and the port of Fujairah in the UAE. The UAE has a pipeline of 1.5 million bpd capacity, which links its processing facilities at Habshan to a refinery at Fujairah. Between January and August 2024 about 4.5 million bpd of crude and condensates from the Middle East bypassed the Strait of Hormuz, according to Vortexa, another data analysis house. However, exports from Iraq, Kuwait and Qatar have no alternative but to go through the strait. Saudi Arabia has built pipelines to divert part of its production to the Red Sea and bypass the Strait of Hormuz, but this route has been attacked regularly since last November by Iranian-backed Houthi rebels. Sina Azodi, a lecturer at the Elliott School of International Affairs Institute at George Washington University in the United States, said that attacking Iranian oil refineries or energy installations could lead to crises similar to the tanker war of 1980-88 and the first and second Gulf wars. Then, the US was forced to flag Kuwaiti tankers as American and US warships escorted the tankers through the strait. The GCC states have stressed their neutrality in any conflict but this may be difficult to maintain, particularly if the conflict persists. “Iranians have repeatedly threatened that if they can’t export their own [oil] safely, others can’t either,” Azodi said. He pointed to events in 2018, when Iranian forces attacked four oil tankers after the Donald Trump administration tightened sanctions on the Islamic Republic. Maxim Shemetov/ReutersWorkers at the Saudi Aramco oil facility in Abqaiq, Saudi Arabia, which Iran attacked with drones in 2019 Iran’s allies, notably the Houthis in Yemen, have also attacked Saudi oil facilities. In 2019 missiles and drones hit one of Saudi Arabia’s main refineries at Abqaiq in the eastern province, briefly cutting the kingdom’s output by half and causing international oil prices to spike. The Houthis claimed the attack but Saudi Arabia said some of the missiles came from the east. Bertrand Besancenot, a former French ambassador in the Middle East, said that the closure of the Strait of Hormuz would have significant consequences, but the US and its allies have important military means to mitigate it. Western allies are present in the Gulf through the United States’ Al Udeid Air Base in Qatar and naval facilities in Bahrain. France also maintains a strategic military presence in the Gulf at a naval base in Abu Dhabi. Iran’s energy installations may be targeted in Israeli strikes Oil prices jump 3% as Middle East conflict intensifies Conflict risk leads Gulf airlines to cancel regional routes Iran may try to mine the strait, which is only 21 miles across at its narrowest, or launch land-based anti-ship missiles. Rachel Ziemba, founder of Ziemba Insights in New York, said: “I doubt that Iran could hold the strait closed for long but could choose to harass global ships.” However, Ziemba said, this would harm warming relations with Arab neighbours. “Doing so would undermine its detente with the GCC countries [Iran] wishes to have a closer relationship with and attract investment from,” she said. Hasan Alhasan, senior fellow for Middle East policy at the International Institute for Strategic Studies in Bahrain, said that there was a risk of ecological damage if tankers are damaged in a conflict. “The Gulf has been the site of some of the largest conflict-related oil spills in history,” Alhasan said. Oil prices were down on Monday, after rising 8 percent last week, the highest since January 2023. Brent crude futures fell 31 cents, or 0.4 percent, to $77.74 per barrel by 04:35 GMT. US West Texas Intermediate crude futures was down 20 cents, or 0.27 percent, to $74.18 per barrel.