Amid the war between Israel and Iran, Iran’s parliament has expressed support for closing the Strait of Hormuz, citing a senior lawmaker on 23 June. However, the final decision on whether to shut the strategic waterway rests with Iran’s Supreme National Security Council, igniting fear among neighbouring countries.
According to Karim Adel, Egyptian economic expert and head of the Justice Center for Economic and Strategic Studies, international trade routes and major maritime passages are often disrupted by disturbances in critical straits such as Hormuz and Bab el-Mandeb. He noted that such disruptions present both challenges and opportunities for the Suez Canal.
The Egyptian economist explained that rising global trade tensions, whether military or economic, could lead to a decline in foreign direct investment (FDI) flows into emerging markets, including Egypt. This, he said, may result in a slowdown in global trade volumes, a drop in Suez Canal revenues, and a depreciation of the Egyptian pound against the U.S. dollar.
A potential closure of the narrow waterway could send shockwaves through the global economy, not just Egypt’s. The U.S. Energy Information Administration estimates that nearly 20 million barrels of crude oil, representing about one-fifth of the world’s daily consumption, are projected to pass through the strait in 2024.
Wall Street banks have warned that oil prices could surge above USD 100 (EGP 5,120) per barrel if the strait is closed for an extended period. Goldman Sachs, JPMorgan, and energy consultancy Rapidan Energy have all issued separate reports on the potential fallout. JPMorgan analysts noted that the risk of Iran closing the Strait of Hormuz remains low, as the U.S would likely view such a move as an act of war, according to CNBC.
On 23 June, the United States Secretary of State Marco Rubio called on China to intervene with Iran to prevent the closure of the Strait of Hormuz, a vital artery for global oil shipments, between Iran and Oman, warning of heightened risks to international energy markets amid rising military tensions.
“I encourage the Chinese government to reach out on this matter, because they rely heavily on the Strait of Hormuz for their oil supply,” Rubio said in an interview with Fox News. China, Iran’s top oil customer, maintains close diplomatic ties with Tehran.
Rubio warned that any attempt by Iran to shut down the Strait of Hormuz would amount to “economic suicide,” noting that the Islamic Republic relies on the same vital waterway to export its own oil.
The appeal came hours after Iran’s foreign minister warned that Tehran “reserves all options to defend its sovereignty,” following U.S. strikes on three major nuclear sites early Sunday morning.
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