DUBAI, United Arab Emirates (AP) 鈥� The Strait of Hormuz is a small strip of water connecting the Persian Gulf to the world鈥檚 oceans, and it has become a big problem for the .
On a typical day, ships carrying about a fifth of the world鈥檚 oil sail out of the Gulf through the narrow passageway. But the means it鈥檚 effectively closed, hemming in more than 90% of that crude and refined products, according to the International Energy Agency. The Islamic Republic has vowed to , saying it would not allow 鈥渆ven a single liter鈥� to be shipped to its enemies.
The snarls have sent oil prices hovering around and threatened a surge of painful inflation for the global economy if the blockage lasts a long time.
鈥淭he scale of what is at stake cannot be overstated,鈥� said Hakan Kaya, senior portfolio manager at investment management firm Neuberger Berman.
Some energy analysts believe oil prices could jump to $150 per barrel if the strait remains closed for weeks and conditions worsen. That would mean even for drivers worldwide, undercutting household budgets already pressured by high inflation. It would also raise costs for businesses, which could in turn raise prices for customers.
鈥淥ne way or the other, we will soon get the Hormuz Strait OPEN, SAFE, and FREE!鈥� President Donald Trump said in a posting on his social media network Saturday.
Here鈥檚 what to know about the strait and the widening Iran war.
A key waterway for global shipping
The Strait of Hormuz is a bending waterway, about 33 kilometers (21 miles) wide at its narrowest point. It connects the Persian Gulf to the Gulf of Oman. From there, ships can then travel to the rest of the world. While Iran and Oman have their territorial waters in the strait, it鈥檚 viewed as an international waterway all ships can ply. The UAE, home to the skyscraper-studded city of Dubai, also sits near the waterway.
The strait long has been important for trade
The Strait of Hormuz through history has been important for trade, with ceramics, ivory, silk and textiles moving from China through the region. In the modern era, it is the route for supertankers carrying oil and gas from Saudi Arabia, Kuwait, Iraq, Qatar, Bahrain, the UAE and Iran. The vast majority of it goes to markets in Asia, including , China.
While there are pipelines in Saudi Arabia and the UAE that can avoid the passage, the U.S. Energy Information Administration says 鈥渕ost volumes that transit the strait have no alternative means of exiting the region.鈥�
Threats to the route have caused to spike before, like in June during the Israel-Iran war.
Mounting attacks
The United Kingdom Maritime Trade Operations center, run by the British military, says it has received 21 reports of incidents affecting vessels in and around the Persian Gulf, Strait of Hormuz and Gulf of Oman as of Tuesday. It lists 16 attacks and five others as 鈥渟uspicious activity,鈥� involving tankers, tugs, cargo and other vessels.
The waterway is effectively shut
The strait is effectively closed as Iran targets and traffic through the strait.
. At least 89 ships crossed the Strait of Hormuz between March 1 and 15 鈥� including 16 oil tankers, according to maritime data firm Lloyd鈥檚 List Intelligence, down from roughly 100 to 135 vessel passages per day before the war. More than one-fifth of the 89 vessels were believed to be Iran-affiliated, while Chinese- and Greece-affiliated ships are among the rest, it said.
Previously, Iran temporarily in mid-February for what it said was a military drill. In past times of tension and conflict, Iran has at times harassed shipping though the narrows, and during the 1980s Iran-Iraq war, both sides attacked tankers and other vessels, using naval mines to completely shut down traffic at points. But Iran up until now not carried out repeated threats to close the waterway altogether since then, when Israel and the U.S. bombarded Iran鈥檚 key nuclear and military sites.
The U.S. is rolling out ship reinsurance in the region through the U.S. International Development Finance Corp., a government agency that partners with the private sector to back global investment projects, in an effort to get ships moving through the strait again.
Political risk insurance is a type of coverage intended to protect firms against financial losses caused by unstable political conditions, government actions, or violence. Marine insurers had been canceling or raising rates for insurance in the region.
The U.S. reinsurance facility will insure losses up to approximately $20 billion on a rolling basis, according to the International Development Finance Corp., focusing on insuring cargo and physical damage to a ship鈥檚 structure and operating machinery to start.
Trump has said that, if necessary, the U.S. Navy would escort oil tankers through the strait, though that has yet to happen.
Last week, Trump鈥檚 Energy Secretary Chris Wright briefly posted on social media that the U.S. Navy had escorted a tanker through the strait, but he later . The initial posting and walk back helped send oil prices and stock markets swinging sharply, showing how the singular focus of markets is on getting ships through the strait again.
Rejection from NATO
Trump said NATO and most other allies have rejected his calls to help secure the Strait of Hormuz as Iran war rages on.
Trump fumed in a post on social media that the U.S. is not getting support 鈥渄espite the fact that almost every Country strongly agreed with what we are doing, and that Iran cannot鈥� be allowed to secure a nuclear weapon.
鈥淚 am not surprised by their action, however, because I always considered NATO, where we spend Hundreds of Billions of Dollars per year protecting these same Countries, to be a one-way street,鈥� Trump added. 鈥淲e will protect them, but they will do nothing for us, in particular, in a time of need.鈥�
Global shippers suspend operations
Global shippers have issued service alerts saying they have suspended operations in the area.
鈥淭hose ships that got stuck in the Gulf are not going anywhere,鈥� said Tom Goldsby, logistics chairman in the Supply Chain Management Department at the University of Tennessee. 鈥淭here鈥檚 also a whole host of ships that were heading into the Gulf to replace them, and of course they鈥檙e anchored or going elsewhere now.鈥�
The effort to free up oil
The White House on Wednesday announced two moves to boost supplies. It issued a 60-day waiver of the . The 1920s law is often blamed for making gas more expensive. It requires goods shipped between U.S. ports to be moved on U.S.-flagged vessels, and is designed to protect the American shipbuilding sector.
Also, U.S. companies will be allowed to do business with after the Treasury Department eased sanctions, with some limitations. The Treasury issued a broad authorization allowing Petr贸leos de Venezuela S.A, or PDVSA, to directly sell Venezuelan oil to U.S. companies and on global markets, a massive shift after Washington for years had largely blocked dealings with Venezuela鈥檚 government and its oil sector.
That follows an unprecedented move last week by the group representing many of the world鈥檚 wealthiest countries. The International Energy Agency said from its members鈥� emergency reserves 鈥� the largest such move in its history and more than double the 182.7 million barrels that the IEA鈥檚 32 member countries released in 2022 in response to Russia鈥檚 full-scale invasion of Ukraine.
But while such moves can replenish some of the oil supplies blocked in the Persian Gulf, they do so only for the short term. For a longer-term fix, analysts say the Strait of Hormuz needs to clear.
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Associated Press writers Cara Anna in Lowville, New York, Stan Choe in New York and Collin Binkley and Aamer Madhani in Washington contributed to this report. Anderson reported from New York.
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