Industrial market players globally are quite concerned regarding the escalation of conflict in the Middle East, following the US strikes on Iranian nuclear sites carried out over the weekend. On Sunday, June 22, the Iranian authorities threatened to close the Strait of Hormuz, with the country’s parliament reported to be backing the initiative. The closest that Iran came to closing the strait in the past was in the 1980s, whereas otherwise trade on the route has never been seriously disrupted.
The Strait of Hormuz is one of the most vital global shipping routes, used in particular for oil and natural gas transportation. According to the latest data, around 20 percent of total global hydrocarbons are shipped through the strait, specifically from countries like the UAE, Iraq, Kuwait, Qatar, Saudi Arabia and Iran itself. The most obvious and very much undesired outcome in case Iran decides to close the strait would be an increase in oil prices globally, with exports from neighbouring GCC countries being hurt. In the last Iranian year (ended March 2025), Iran exported $67 billion worth of oil, with China alone buying around 85-90 percent of Iran’s total exports. Overall, Asia is also expected to be hit hard by the closure of the Strait of Hormuz as it sources around 80 percent of its hydrocarbons via the route. In fact, according to media sources, the US has already urged China to influence Iran’s decision regarding the strait, underlining the potential threats and economic impacts globally.
The closure of the strait would lead to a significant increase in oil prices for many industries. In particular, the disruptions of oil shipments would lead to increases in fuel and production costs, including for the steel industry, and the increased costs would be eventually passed on to the end-user segment, fueling additional inflation. In addition, supplies and shipments of other goods would be disrupted as well. In the case of the steel industry in particular, the GCC countries importing significant amounts of HRC and other flat products, as well as steel billets, large-size beams and other products.
