Strait of Hormuz on Edge: Will Iran’s Move Ignite an Oil Crisis?

New York, NY, June 12, 2025— Oil prices dipped Thursday—Brent crude down 0.5% to $69.43 and WTI off 0.3% to $67.97—after a 4% surge sparked by Middle East tensions. But the real fear gripping traders isn’t today’s dip; it’s the looming threat of Iran shutting the Strait of Hormuz, a chokepoint for 20% of global oil flows.

With U.S.-Iran nuclear talks faltering and Trump threatening strikes, a single move by Tehran could send Brent to $120-$130 a barrel, per JPMorgan. Could a single misstep by Tehran lead to a global energy catastrophe?

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The Strait’s Stranglehold on Global Oil

The Strait of Hormuz, a 21-mile-wide passage between Iran and Oman, handles 21 million barrels of oil daily—roughly a fifth of global supply. Saudi Arabia, Kuwait, Iraq, and the UAE rely on it, as does Qatar for LNG exports. Iran’s threats to block this artery, coupled with its defiance on uranium enrichment, have traders on high alert.

Britain’s maritime agency warned of escalating military risks, and a closure could spike oil prices to levels unseen since 2008, potentially hitting $350 a barrel if sustained, according to SEB analysts.

U.S.-Iran Standoff Fuels the Fire

The U.S.-Iran talks in Oman on Sunday are in a precarious state. President Trump’s warning of strikes if Iran doesn’t halt uranium enrichment has Tehran vowing to hit U.S. bases in retaliation. The U.N.’s nuclear watchdog just declared Iran in breach of non-proliferation rules, raising the specter of U.N. Security Council action.

If talks collapse, Iran could target the Strait, a move that would disrupt not just its own 3.7 million barrels daily but the entire region’s output, hammering global markets.

Did you know?
In 1988, during the Iran-Iraq War, Iran’s mining of the Strait of Hormuz led to Operation Praying Mantis, where the U.S. Navy destroyed half of Iran’s operational fleet, highlighting the strait’s critical role in global energy security.

Markets Brace for Impact—or a Breather?

Despite Wednesday’s price surge, oil dipped as traders bet on a possible de-escalation from Sunday’s talks. UBS analyst Giovanni Staunovo notes cautious investors are staying sidelined, while StoneX’s Alex Hodes calls the market overbought after hitting two-month highs.

Yet, the risk of a Hormuz blockade keeps a hefty premium baked into prices. OPEC’s 5 million barrels per day spare capacity could cushion some disruption, but analysts warn it may not be enough if Iran acts.