Who loses and who gains if Iran blocks the Strait of Hormuz

Every day 20 million barrels of oil for a value exceeding one billion dollars; this is the economic significance of the Strait of Hormuz, which Iran is threatening to block. Just 33 kilometers of stretch of sea that, however, is a crucial geopolitical hub for the fluidity of international trade by sea, especially of oil and natural gas. One out of five barrels of oil in the world passes through Hormuz, as does an important share of natural gas, especially from Qatar. It is obvious that a potential blockade represents a real and direct threat from the Iranian theocracy to the West. But at this stage, who would lose and who, instead, would gain from the possible closure of the Strait?

Iran: double own goal If Iran decided to block the Strait of Hormuz, it would commit a sensational own goal. Or perhaps two. The first is commercial and strategic, because being an oil exporter – even if limited by sanctions – Iran itself is the first country to use Hormuz for national crude exports. The second own goal would be political, because with that decision Tehran would almost certainly risk new international sanctions.

China: debacle China is the country that would lose the most from the possible blockade. First of all because over 40% of the oil imported by China passes through Hormuz. Not only that. The increase in oil and gas prices on a global level would penalize Beijing first, the world’s number one importer and significantly energy-hungry in terms of the sectors with the highest domestic production. For China, there are also risks of imported inflation and economic slowdown. Factors that lead to crediting the Dragon as the main reason for hope that Tehran keeps its cool and decides not to proceed with the blockade.

Russia: short-term advantage A possible consequence of the blockade would be the strong rise in oil and gas prices. Moscow would re-establish itself as an alternative international supplier, and could strengthen its exports to China, India, and Turkey, with an increase in profits and a strengthening of international political influence, currently at a low due to the prolonged conflict in Ukraine.

USA: not so bad economically speaking With Hormuz blocked, the Trump administration would see American big companies in the sector (Exxon and Chevron) advantaged, which would increase profits. As would all the other shale oil and gas producers, who would earn from the sharp rise in prices. The huge question mark would arise from the political and strategic point of view, because if the escalation were to continue, Trump would be increasingly forced to choose military intervention. Which historically has always involved very high costs, both social and economic.

EU: limited economic impact, political concern “The possible closure of the Strait of Hormuz by Iran would be extremely dangerous and negative for everyone.” These are the words of the EU High Representative, Kaja Kallas, on her arrival this morning at the EU Foreign Affairs Council. Which demonstrate the strong concern for an escalation, especially from the political point of view. Also because from a strictly economic point of view, if Iran were to close Hormuz, the European Union would be among the least impacted international actors, because it is not directly so dependent on Gulf oil. EU imports from Saudi Arabia, Kuwait, and Iraq together are clearly minor compared to those from Norway, the United States, Kazakhstan, and Algeria. Of course, in the case of a prolonged blockade, Brussels too would suffer the consequences damaging the global market. But long-term vision has become a rare commodity in these hours. The fire has spread and must be extinguished quickly and effectively. The closure of the Strait of Hormuz in this sense would be gasoline on the fire.