Iran’s Expanded Blockade Threat: Potential Risks for Oil, LNG, Fertilizers, and Diamonds
Just as global energy supplies were stabilizing after months of disruption, Iran has issued a new warning regarding the Strait of Hormuz. The Islamic Revolutionary Guard Corps (IRGC) stated that it could extend its efforts to disrupt regional trade beyond this critical waterway. This warning raises significant concerns about the movement of vital exports from the Middle East.
Iran’s threats follow the closure of the Strait of Hormuz and the reimposition of a U.S. naval blockade on Iranian ports. The IRGC declared that “regional energy exports are either shared by all, or denied to all,” signaling a potential escalation in tensions that could impact global trade routes. The Strait of Hormuz is crucial, as it carries nearly 20 million barrels of oil daily, accounting for about a quarter of the world’s seaborne oil trade.
Strait of Hormuz in focus
The Strait of Hormuz is the world’s most vital energy chokepoint, connecting the Persian Gulf with the Gulf of Oman and the Arabian Sea. It serves as the primary export route for several countries, including Saudi Arabia, the UAE, Iraq, Kuwait, Qatar, Bahrain, and Iran. While Saudi Arabia and the UAE have limited pipeline alternatives, other nations heavily rely on this route for their oil exports.
In 2025, approximately 15 million barrels per day (mb/d) of crude oil, representing nearly 34% of global crude trade, passed through the Strait. The IRGC has stated that the Strait will remain closed until what it terms “the end of America’s evils.” Before the current conflict, around one-fifth of global oil and gas shipments transited this critical waterway daily.
What could stop moving?
The Strait is equally essential for liquefied natural gas (LNG) exports. About 93% of Qatar’s LNG and 96% of the UAE’s LNG exports pass through the Strait, making it a key route for global LNG trade. In 2025, Qatar exported over 112 billion cubic meters (bcm) of LNG, while the UAE exported around 7 bcm. Currently, there are no practical alternative routes for these LNG exports.
A prolonged disruption could remove over 300 million cubic meters of LNG daily from global markets, significantly impacting supply. With existing LNG export facilities already operating near capacity, quickly replacing these supplies would be challenging.
Other routes under threat too
Alternative routes exist but can only replace a fraction of the energy volumes typically transported through the Strait. The Bab el-Mandeb Strait, linking the Red Sea with the Gulf of Aden, is another critical maritime gateway. Analysts suggest that Iran may leverage its Houthi allies in Yemen to disrupt traffic through this route.
A senior Houthi official warned that the group could close the Bab el-Mandeb Strait if Saudi Arabia continued its military actions in Yemen. This warning follows recent missile attacks on Saudi Arabia by the Houthis, who have previously targeted commercial shipping in the Red Sea amid escalating tensions.
Asia would bear the brunt
Asia is the primary destination for energy shipments transiting the Strait of Hormuz. Approximately 80% of oil transported through this route heads to Asian markets, with China, India, and Japan being the largest consumers. In 2025, China and India accounted for 44% of crude exports through the Strait.
The situation is similar for LNG, with nearly 90% of shipments destined for Asia. South Asian countries, including Bangladesh, India, and Pakistan, sourced almost two-thirds of their LNG imports through the Strait last year. Disruptions in LNG supplies could severely impact electricity generation and other gas-intensive industries in these nations.
Tensions continue to escalate
The latest threats from Iran follow U.S. military actions aimed at degrading Iranian capabilities used to attack commercial shipping in the Strait. The U.S. reported that Iran had attacked seven commercial vessels recently, resulting in casualties among crew members. In response, the U.S. military conducted strikes on military targets near the Strait of Hormuz.
Oil prices have risen in light of these developments, with Brent crude reaching its highest level since June 12. West Texas Intermediate also saw gains, surpassing the $85 per barrel mark.
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