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The Strait of Hormuz is one of the world’s most strategic oil checkpoints, but few individuals know where it is located or realize the important role it plays in the industry and current affairs.

The Strait of Hormuz runs between Oman and Iran, where it forms a chokepoint between the Arabian Gulf and the Gulf of Oman. The strait connects key crude oil producers with markets around the world. Without it, there would be no way to transport goods out of the area by sea. 


What is a Chokepoint? 

According to the EIA, a chokepoint is “a narrow channel along widely used global sea routes that are critical to energy security.” Unlike other shipping channels, there aren’t any good regional alternatives to the Strait of Hormuz, meaning that any problems can lead to delays, higher shipping costs, and a worldwide spike in energy prices. 

Not only is the Strait of Hormuz’s location strategic, but the strait also sees one-third of the world’s seaborne traded oil, which equates to 21 million barrels per day. Because of this, the strait is considered the world’s most important oil chokepoint. 


Which Markets Depend on Oil from the Strait?

The majority of oil transported through the straight goes to Asian countries such as India, Japan, China, South Korea, and Singapore. The United States is no longer as dependent on oil from the Persian Gulf as it once was thanks to the recent shale boom. 


Recent Tension

Regardless of the markets, the Strait of Hormuz is an extremely important area where things are starting to heat up. The Gulf region has been shaken by instability over the last several months. Iran has also threatened to continue its nuclear program, and the United States has responded with sanctions. Since May, six oil tankers have been attacked, leading to an even more tumultuous relationship between Iran and the United States. The United States has imposed new sanctions on Iran, and in return, Iran has threatened to close the Strait of Hormuz

The Strait of Hormuz plays a pivotal role in both the oil industry and the world stage. As the relationship between Iran and the United States heats up, the potential of the strait closing increases. This would have a detrimental effect on the world’s oil markets and energy prices.