Twenty-one miles. That’s the width of the Strait of Hormuz at its narrowest point — a sliver of water between Iran and Oman through which roughly 20% of the world’s daily oil consumption passes. It is, by any measure, the most strategically consequential chokepoint on the planet. And right now, with tensions between the United States and Iran escalating over Tehran’s nuclear program, the question of what happens if that chokepoint closes — even temporarily — is no longer hypothetical. It’s the scenario keeping energy traders, defense planners, and central bankers awake at night.
Steve Hanke, a professor of applied economics at Johns Hopkins University and a former senior economist on President Reagan’s Council of Economic Advisers, has been sounding alarms. In a recent interview with Business Insider, Hanke warned that a military confrontation between the U.S. and Iran could push oil prices well above $100 per barrel — and potentially far higher depending on the duration and severity of any disruption to shipping through the Strait.
Hanke didn’t mince words. He described the Strait of Hormuz as “the jugular vein of the world oil market” and argued that any kinetic action against Iran — whether targeted strikes on nuclear facilities or a broader campaign — would almost certainly provoke Tehran to retaliate by threatening or disrupting tanker traffic. Iran has repeatedly signaled this is a card it’s willing to play. Its Islamic Revolutionary Guard Corps Navy maintains a fleet of fast-attack boats, anti-ship missiles, and naval mines specifically designed for asymmetric warfare in the confined waters of the Persian Gulf.
The numbers speak plainly. According to the U.S. Energy Information Administration, approximately 17 million barrels of oil per day transited the Strait of Hormuz in 2023, along with substantial volumes of liquefied natural gas from Qatar, the world’s largest LNG exporter. A closure — even a partial one lasting days rather than weeks — would constitute the most severe supply disruption since the 1973 Arab oil embargo. Perhaps worse.
Markets are already nervous. Brent crude, the international benchmark, has been trading with a heightened geopolitical risk premium baked in for months. But Hanke’s point, and it’s one shared by a growing number of analysts, is that current prices don’t remotely reflect the tail risk of an actual military conflict. Oil at $80 or even $90 a barrel assumes the Strait stays open. If it doesn’t, triple digits become the floor, not the ceiling.
So what would a closure actually look like?
Iran doesn’t need to sink an aircraft carrier. It doesn’t even need to fire a missile at a tanker. The mere credible threat of mining the Strait — laying underwater explosives along the shipping lanes — would be enough to send insurance premiums for tanker voyages through the roof. Lloyd’s of London and other maritime insurers would likely designate the Persian Gulf a war-risk zone, as they did during the Iran-Iraq tanker war in the 1980s. Shipping companies would reroute or refuse to sail. And the oil that does continue to flow would carry a massive cost premium that would ripple through every economy on Earth.
Iran has practiced for this. Its military exercises routinely simulate closing the Strait, and the IRGC has invested heavily in anti-ship ballistic missiles capable of targeting vessels from shore-based launchers. The geography favors the defender. The shipping lanes run close to Iran’s coastline, within easy range of coastal batteries, drone swarms, and fast boats that can scatter and regroup in ways that are difficult for conventional navies to counter.
The United States, of course, maintains the Fifth Fleet in Bahrain, just across the Gulf. The U.S. Navy has the firepower to reopen the Strait eventually. But “eventually” is the operative word. Clearing mines alone could take weeks. And during that period, the global oil market would be operating in crisis mode — drawing down strategic petroleum reserves, rationing supply, and watching prices spike in ways that could trigger recession in import-dependent economies across Asia and Europe.
Hanke emphasized this economic dimension forcefully. He noted that the inflationary impact of a sudden oil price shock would be particularly damaging given that central banks in the U.S. and Europe have only recently managed to bring inflation closer to target levels after the post-pandemic surge. A supply-driven oil shock is the one thing monetary policy can’t fix. You can’t raise interest rates to produce more barrels of crude.
There’s a broader strategic context here that matters. The Biden administration spent much of its tenure attempting to revive some version of the Iran nuclear deal, with limited success. The Trump administration, which had previously withdrawn from the original 2015 agreement and reimposed maximum pressure sanctions, has taken an even harder line in its current term. Diplomatic channels between Washington and Tehran are thin. The International Atomic Energy Agency has reported that Iran’s uranium enrichment has reached levels uncomfortably close to weapons-grade, and Israeli officials have repeatedly stated that a nuclear-armed Iran represents an existential threat they will not tolerate.
Israel’s calculus adds another variable. If the U.S. doesn’t act, Israel may — and Israeli strikes on Iranian nuclear facilities would almost certainly produce the same retaliatory dynamic in the Strait. Iran’s leadership has explicitly linked any attack on its territory to a response targeting Gulf oil infrastructure and shipping. This isn’t bluster for domestic consumption. It’s deterrence strategy, and it works precisely because the economic consequences of following through are so enormous.
The LNG dimension deserves attention too. Qatar, which shares the massive North Field/South Pars gas reservoir with Iran, ships virtually all of its LNG exports through the Strait of Hormuz. Europe, still adjusting to the loss of Russian pipeline gas after the invasion of Ukraine, has become increasingly dependent on Qatari LNG. A disruption to those flows would hit European energy markets hard, potentially reigniting the kind of energy crisis that sent natural gas prices to record levels in 2022.
Asia would fare no better. Japan, South Korea, and China are among the largest importers of both oil and LNG transiting the Strait. China alone imports roughly 40% of its crude through the chokepoint. Beijing has been building strategic reserves and diversifying suppliers — more oil from Russia, more from Brazil — but there is no near-term substitute for the volumes that flow through Hormuz.
Some analysts have pushed back on the most dire scenarios. They argue that Iran’s leadership, however bellicose its rhetoric, understands that closing the Strait would also cut off its own oil exports — the primary source of government revenue. Self-deterrence, in other words. But Hanke and others counter that a regime facing existential military strikes might not weigh economic self-interest the way rational-actor models predict. Desperate governments do desperate things.
And there’s precedent. During the 1980s tanker war, Iran did attack commercial shipping in the Gulf, laying mines and firing on vessels. The U.S. Navy responded with Operation Earnest Will, escorting reflagged Kuwaiti tankers, and later Operation Praying Mantis, which destroyed several Iranian naval vessels. The Strait never fully closed, but the disruptions were significant enough to reshape global oil markets for years.
Today’s situation is arguably more dangerous. Iran’s military capabilities have advanced considerably since the 1980s. Its missile arsenal is larger and more sophisticated. Its drone technology, battle-tested through proxies in Yemen, Iraq, and Lebanon, represents a threat that didn’t exist four decades ago. The Houthi campaign against Red Sea shipping in 2024 — widely attributed to Iranian support and weaponry — offered a preview of what asymmetric disruption of maritime commerce looks like in the modern era. And that was a secondary shipping route. The Strait of Hormuz is the main artery.
Hanke’s warning, then, isn’t alarmism. It’s arithmetic. Remove 17 million barrels a day from global supply, even briefly, and the math is brutal. The International Energy Agency estimates that OECD nations hold approximately 4.1 billion barrels in combined commercial and strategic petroleum reserves. That sounds like a lot — until you realize global consumption runs about 103 million barrels per day. Strategic reserves buy time. They don’t solve the problem.
The political ramifications would be immediate and severe. Any U.S. administration presiding over $120 or $150 oil would face intense domestic pressure. Gasoline prices at the pump — the most visible and politically potent price signal in American life — would surge. The inflationary pass-through to food, transportation, and manufacturing would follow within weeks. Consumer confidence, already fragile in many economies, would crater.
Energy companies, paradoxically, would see windfall profits in the short term. U.S. shale producers, already the world’s largest oil-producing sector, would benefit from higher prices but couldn’t ramp production fast enough to offset a Hormuz-scale disruption. Shale wells take months to drill and complete. The spare capacity that exists globally — primarily in Saudi Arabia and the UAE — would itself be at risk if the conflict widened to include attacks on Gulf state infrastructure, something Iran’s proxy network has demonstrated the capability to do. The 2019 drone and missile attack on Saudi Aramco’s Abqaiq processing facility, which temporarily knocked out half of Saudi Arabia’s oil production, was a stark reminder.
For investors, the calculus is uncomfortable but clear. Geopolitical risk in the Persian Gulf is underpriced. Options markets reflect some nervousness, but the base case for most energy forecasters still assumes continued flow through the Strait. If that assumption breaks, the repricing would be violent and fast. Energy equities, defense stocks, and commodities would surge. Bonds would sell off on inflation fears. Equities broadly would come under pressure as recession risks spiked.
Hanke’s broader argument, as reported by Business Insider, is that policymakers need to take this scenario far more seriously in their planning. That means bolstering strategic reserves, accelerating diplomatic efforts to avoid conflict, and — if conflict becomes unavoidable — having a clear plan to secure the Strait quickly and minimize the duration of any disruption. None of those preparations are simple. All of them are necessary.
The oil market has a long memory for supply shocks. The 1973 embargo. The Iranian Revolution in 1979. The Gulf War in 1990. Each one reshaped energy policy, geopolitics, and economic trajectories for years afterward. A Strait of Hormuz crisis in 2026 would belong to that same category — except the global economy is more interconnected, more energy-intensive, and more fragile than it was in any of those prior episodes.
Twenty-one miles of water. That’s all that separates a manageable energy market from a global economic crisis. And the margin for miscalculation is shrinking by the day.
WebProNews is an iEntry Publication