The U.S.-Israeli war on Iran has sent oil prices soaring and shed new light on the importance of the Strait of Hormuz, a narrow waterway that links Persian Gulf energy exporters with global markets.
Iran’s Islamic Revolutionary Guard declared Wednesday it has taken control of the passageway, halting most vessel traffic and choking off the flow of Middle Eastern oil and gas.
Oil prices have risen by 12 per cent since the start of the war on Saturday amid supply fears heightened by the closing of the strait.
“It’s extremely critical,” Basil Karatzas of New York-based Karatzas Marine Advisors & Co., said of the waterway that bears one-quarter of the world’s seaborne oil. Eighty per cent of the crude is destined for Asia. Most of the remainder goes to Europe with a small amount to the Americas, according to the Paris-based International Energy Agency.
Qatar and the United Arab Emirates ship almost all their liquefied natural gas through the strait, accounting for 20 per cent of global supplies.
Canada produces more oil than it consumes and is not expected to imminently feel the pinch – other than at the gas pumps. Saudi Arabia was the third-largest source of Canada’s oil imports in 2023, accounting for 11 per cent, according to Statistics Canada. Refineries in Eastern Canada have been the main domestic buyers of Saudi oil. Irving Oil and Valero Energy did not respond to questions on Tuesday and Wednesday.
“Most oil tankers coming to Montreal come from the United States or Europe. So, no ships have been affected by the Strait of Hormuz for the moment,” said Renée Larouche, a spokeswoman for the Port of Montreal.
Mr. Karatzas said China will be most affected by the strait’s blockage.
“For North America, it’s not a big deal,” he said by phone. “It’s a big deal for China because most of the Iranian oil has been going to China. Although Iran will be controlling the Strait of Hormuz, it will not be easy to export crude oil to China. So, they will have to buy crude oil from other sources, which is going to push energy prices higher.”
The war in the Gulf region is disrupting shipping lanes for more than just oil. Some container ships that carry consumer goods to North America and Europe from Asia are avoiding the Suez Canal and instead sailing the longer route around the southern tip of Africa.
Jill Matthews, a spokeswoman for the Port of Halifax, said it is too early to say what impact this shift will have on vessel arrivals in Nova Scotia.
While Canadians are not likely to see any change in oil supplies, they are feeling the impact when they fill up their cars. Gasoline prices have risen by almost 11 cents a litre in the past week to an average of $1.42, according to GasBuddy.com.
Goldman Sachs on Wednesday raised its second-quarter oil price forecast for Brent crude by US$10 a barrel to US$76, based on expected lower global stockpiles and Mideast production in March.
At least 200 ships, including oil and liquefied natural gas tankers as well as cargo ships, remained at anchor in open waters off the coast of major Gulf producers such as Iraq, Saudi Arabia and Qatar, according to Reuters’ estimates based on ship-tracking data from the MarineTraffic platform.
Hundreds of other vessels remained outside the strait unable to reach ports, shipping data showed.
Oil tankers pass through the Strait of Hormuz in 2018.Hamad I Mohammed/Reuters
U.S. President Donald Trump on Tuesday ordered the U.S. International Development Finance Corp. to provide risk insurance to shipping lines in the region, and said he might have the U.S. Navy escort oil tankers “to ensure the free flow of energy.”
Mr. Karatzas said such a plan would be helpful but not viable over the long term.
He said there are few shipping alternatives to the strait for energy producers in the region. Saudi Arabia and the UAE have pipelines that could take some of the oil, but Iran, Iraq, Kuwait, Qatar and Bahrain rely on the waterway for almost all their energy products.
“There are a couple of pipelines going to Suez Canal and the Mediterranean, but they are not big enough,” he said.
With reports from Reuters
Editor’s note: Due to a caption error, a previous version of this article carried a photo that appeared to illustrate the Strait of Hormuz. The photo was not the full strait, but an inner section near Iran's coast. The story has been updated with a photo of a tanker passing through the strait.