Iran Declares the Strait of Hormuz Closed and Fires on a Ship
Iran’s Revolutionary Guard declared the Strait of Hormuz closed “until further notice” after firing on the GFS Galaxy, a Cyprus-flagged container ship it said was using an unauthorised route through the waterway. India said eleven of its nationals were aboard; ten were rescued and one is missing. Roughly a fifth of the world’s oil passes through the strait, and with no weekend trading the closure leaves crude braced to spike when markets reopen: Brent was already near $76 and heading for a weekly gain after a week of strikes.
A declared closure of Hormuz is the scenario the oil market has feared for decades, because there is no quick alternative route for the 13m-or-so barrels a day that pass through it; pipelines bypassing the strait carry only a fraction. Whether Iran can actually enforce a closure, against the US Navy and its own interest in exporting oil, is the open question — but even the threat, backed by a strike on a commercial vessel, is enough to send insurers, shipowners and traders scrambling and to put a war premium into every barrel. For British households the transmission is direct and quick, through petrol, diesel and the gas price that sets energy bills. The strike on the GFS Galaxy, and the Indian sailor still missing, is a reminder that the cost falls first on the crews who move the world’s trade. Watch the oil price at Monday’s open, tanker traffic and war-risk insurance, and whether the US moves to reopen the strait by force.