Iran-US Tensions: Hormuz Strait Risk & Oil Supply Fears

Dozens of countries are seeking ways to restart energy shipments through the Strait of Hormuz after threats from U.S. President Donald Trump of more aggressive strikes on Iran, driving up oil prices and increasing financial strain on consumers.

Strait of Hormuz Disruptions

Following speculation that Trump might announce an end to the conflict, the president reiterated threats on April 2, stating via social media: “IT IS TIME FOR IRAN TO MAKE A DEAL BEFORE IT IS TOO LATE”. He also shared a video depicting a U.S. bombing of a newly constructed bridge between Tehran and Karaj.

The B1 bridge was slated to open to traffic this year. Iranian state media reported eight deaths and 95 injuries as a result of the U.S. attack. “Striking civilian structures, including unfinished bridges, will not compel Iranians to surrender,” said Iran Foreign Minister Abbas Araghchi in a statement.

Escalating Tensions

Trump stated operations would be intensified and offered no timeline for ending hostilities, prompting threats of retaliation from Tehran and a decline in share prices. “We’re going to hit them extremely hard over the next two to three weeks. We’re going to bring them back to the Stone Ages where they belong,” Trump said amid mounting domestic pressure to end the conflict.

Britain chaired a virtual meeting on April 2 with approximately 40 countries to explore restoring freedom of navigation, but no specific agreement was reached. Participants did agree that all nations should have free access to the waterway, according to one official.

Iran has effectively closed the Strait of Hormuz, which typically carries about 20% of the world’s oil consumption, in response to U.S.-Israeli strikes that began on Feb. 28. The conflict has led to increased oil prices, inflation concerns, supply-chain issues, and worries about the global economy.

Competing Visions for Control

Despite the loss of leaders, Tehran is proposing a new framework for controlling the strait, including a protocol with Oman requiring ships to obtain permits and licenses. “These requirements will not mean restrictions, but rather to facilitate and ensure safe passage and provide better services to ships that pass through this route,” said Deputy Foreign Minister Kazem Gharibabadi, according to Iran’s IRNA news agency.

An Iranian military spokesman stated on April 2 that the strait would remain closed “long term” to the U.S. and Israel. The European Union’s foreign policy chief Kaja Kallas rejected Iran’s plan to charge fees for passage, stating, “International law doesn’t recognise pay-to-pass schemes.”

Economic Impact and Military Responses

Benchmark Brent crude prices rose approximately 7% to around $108 a barrel, U.S. bond yields increased, and global equity markets experienced losses. “The key question in all investors’ minds is ‘When is this going to be over?’” said Russel Chesler, head of investments and capital markets at VanEck Australia.

Trump warned that strikes on Iran’s energy and oil infrastructure were possible if Iran did not meet U.S. demands, and urged countries reliant on fuel shipments through the Strait of Hormuz to “just grab it”. However, European and other nations have indicated they will only assist in securing the strait if a ceasefire is established. “It can only be done in consultation with Iran,” French President Emmanuel Macron said.

Iran’s armed forces responded with a warning of “more crushing, broader and more destructive” attacks. The war will continue until the “permanent regret and surrender” of Iran’s enemies, according to Ebrahim Zolfaqari, spokesman for the Iranian military’s Khatam al-Anbiya central headquarters.

Iran’s Fars news agency listed potential targets in Saudi Arabia, Kuwait, Abu Dhabi, and Jordan. The Revolutionary Guards claimed to have targeted an Amazon cloud computing centre in Bahrain.

There are concerns Iran may gain control over Middle East energy supplies by blocking the Strait of Hormuz and targeting oil tankers and Gulf countries hosting U.S. troops. Fuel shortages are causing economic strain in Asia and are expected to impact Europe soon. A UN report warned of a potential cost-of-living crisis in Africa due to a sharp economic slowdown.

Iranian state media reported eight deaths and 95 injuries from the strike on the bridge linking Tehran and Karaj. Large steel producers and Tehran’s Pasteur Institute of Iran medical research centre were also reported to have sustained serious damage. The Revolutionary Guards said they had targeted US-linked steel and aluminium facilities in Gulf states and an Oracle data centre in Dubai, and would step up such attacks if Iranian industries were hit again.

Sirens sounded over Jerusalem after the Israeli military identified a missile launch from Yemen. Yemen’s Iran-aligned Houthis claimed an attack on Israel at the end of March, marking an expansion of the conflict.

Thousands have been killed and tens of thousands injured across the Middle East since the war began. The head of the International Federation of Red Cross and Red Crescent Societies delegation reported exponentially rising medical needs and potential supply shortages on April 2.