20% of global oil supply under threat
• US seeks China help to stop closure
• EU warns move ‘extremely dangerous’
Iran’s Supreme National Security Council will make a final decision on the plan to close the Strait of Hormuz, a vital maritime gateway which carries one-fifth of global oil output, after its parliament approved the motion in response to US strikes over the weekend.
“One of Iran’s clear options in response to foreign aggression is closing the Strait of Hormuz. We will act when the time is right,” said Mohammad Hassan Asfari, a member of the parliament’s national security committee.
Global markets reacted nervously, with oil prices jumping more than four percent early Monday before falling briefly into the red.
US Secretary of State Marco Rubio urged China to help deter Iran from shutting down the Strait of Hormuz.
“I encourage the Chinese government in Beijing to call them about that because they heavily depend on the Strait of Hormuz for their oil,” Rubio said on Fox News.
“If they do that (close Hormuz), it will be another terrible mistake. It’s economic suicide for them if they do it, and we retain options to deal with that,” Rubio added.
China urged both Iran and Israel to prevent the conflict from spilling over, warning of potential economic fallout.
“The Chinese side urges the parties to the conflict to prevent the situation from escalating repeatedly, resolutely avoid the spillover of war, and return to the path of political resolution,” foreign ministry spokesman Guo Jiakun said.
The EU’s top diplomat warned it would be “extremely dangerous” should Iran shut down the crucial Strait of Hormuz trading route over US strikes on its nuclear sites.
“Any Iranian closure of the Strait of Hormuz would be extremely dangerous,” Kaja Kallas wrote on X, as EU foreign ministers met in Brussels for talks with the Iran-Israel conflict high on the agenda.
Iran is the world’s ninth-biggest oil-producing country, with output of about 3.3 million barrels per day. It exports just under half of that amount and consumes the rest.
Tehran threatened to inflict “serious” damage in retaliation for US strikes on the Islamic republic’s nuclear facilities, as the Iran-Israel war entered its 11th day despite calls for de-escalation.
“So far, satellite images reportedly suggest that oil continues to flow through the Strait, which may explain the muted market reaction to the news,” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank.
“Many remain optimistic that Iran will avoid a full-blown retaliation and regional chaos, to prevent its own oil facilities from becoming targets and to avoid a widening conflict that could hurt China – its biggest oil customer.”
But “if things get uglier” the price of US crude could even spike beyond $100 per barrel, she said.
“An oil price shock would create a real negative impact on most Asian economies” as many are big net energy importers, economists at MUFG warned.
Chris Weston at Pepperstone said Iran would be able to inflict economic damage on the world without taking the “extreme route” of trying to close the Strait of Hormuz.
“By planting enough belief that they could disrupt this key logistical channel, maritime costs could rise to the point that it would have a significant impact on the supply of crude and gas,” he wrote. AFP
