Iran Moves to Close the Strait of Hormuz

Hormuz shutdown could spike oil to $150 and force rate hikes

Iran’s parliament has voted to approve the closure of the Strait of Hormuz, a move not seen since 1972. The proposal now waits for confirmation from the Supreme National Security Council and final approval by Iran’s Supreme Leader. If it proceeds, over 20 million barrels of oil per day, roughly one-fifth of global oil consumption, will be directly affected.

The Strait of Hormuz is a strategic choke point. It connects the Persian Gulf to the Arabian Sea and handles the majority of oil exports for Gulf countries, including Saudi Arabia, the UAE, Kuwait, Qatar, and Bahrain. There are limited alternative routes. Existing pipelines can redirect some supply, but they cover only a fraction of the daily output. Even under optimistic estimates, rerouting through pipelines leaves a shortfall of around 65 percent of regional supply. That amounts to more than 10 percent of global oil flow.

Following the U.S. airstrikes on Iran, over 50 tankers scrambled to exit the Strait. Though markets are closed, a supply shock is expected. JPMorgan has described this as their worst-case scenario in the context of the Israel-Iran conflict. Their projections estimate oil prices could surge to $120–$130 per barrel. In a more prolonged disruption, other estimates reach $150–$200. Oil has already gained over 35 percent since its April low, and the latest developments have not yet been priced in.

Any spike in oil prices directly hits consumer inflation. The Federal Reserve has noted that every $10 increase in oil prices adds approximately 20 basis points to core inflation. Prices have already risen around $20 in recent months, which could add up to 40 basis points. A further rise to $130 oil would push U.S. CPI back toward 5 percent, levels not seen since March 2023. That return to high inflation levels would force the Fed back into rate hikes, reversing current monetary policy trends.

The impact of a formal closure would be immediate. The U.S. and EU both receive oil from the Strait. Even countries not directly importing through Hormuz would be affected by price volatility and global supply disruption. The fall out is going to be global, not limited locally. The market has already been showing signs of tightening since mid-June, with steady declines in tanker traffic through the Strait. A full legal closure now moves from theory to pending decision.

The authority now rests with Iran’s top security body and Supreme Leader Khamenei. Once approved, the closure would be a legal, declared act of state policy. The signal to the world is that Iran is not bluffing, and the consequences will not be contained to the Gulf.

Compounding this, former Russian president Dmitry Medvedev has claimed that some countries are ready to supply Iran with nuclear warheads. He also said Iran’s weapons development will continue in response to U.S. attacks. That statement raises the stakes beyond energy markets. It puts the crisis on a nuclear track, even if only as political messaging for now.

The global financial system is now locked into this escalation. Equities, bonds, and commodities will open into a week of high volatility. The core drivers will be geopolitical, not economic. Central banks, oil producers, and shipping networks are now watching the same decision: whether Iran follows through with the legal closure of the most important oil transit point in the world.

If the decision is finalised, markets will adjust immediately and sharply. Inflation will rise. Rates will have to be reconsidered. Energy security will move back to the center of global policy. None of this is accidental, the globalist would have factored all this in their agenda. How else will they try to force CBDC's on us without crashing the world economy? The Iranian decision on the other hand reflects a justified political calculation. Iran is responding to aggression, military strikes and ongoing pressure. It is also a reminder that control over oil is still a lever of power, that power doesnt just rest with the US and its lackies, Iran has little choice here than to pull it. Buy your staples now, hoard what you can, looks like those peppers were not crazy after all.

Global GeoPolitics

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