On Thursday, ING analysts highlighted the potential global economic risks associated with the strategic Strait of Hormuz. They emphasized the importance of this narrow waterway, which serves as a crucial conduit for the world's oil supply. The Strait of Hormuz is a vital maritime passageway, linking the Persian Gulf with the Gulf of Oman, and is notably significant for the transportation of oil, petroleum products, and liquefied natural gas (LNG).
According to ING, the Strait of Hormuz is at the heart of global trade, with approximately one-fifth of the world's oil passing through it. This translates to about 20 million barrels of oil per day, accounting for 20% of global crude and refined product consumption. The countries surrounding the Persian Gulf, including Saudi Arabia, Iraq, the United Arab Emirates (UAE), Kuwait, Iran, and Qatar, are particularly reliant on this route for their oil exports.
The analysts pointed out that any disruption in the Strait could have severe consequences for the global economy. Such an event could lead to lengthier transit times, production delays, and ultimately, higher inflation. They underscored that the Strait has been a focal point of geopolitical tensions for years, and any conflict that leads to its closure would not only affect Iran but also Iraq, Qatar, and Kuwait, which depend on this route to transport their crude oil exports.
While there are some alternative routes, such as the East-West crude pipeline (Abqaiq-Yanbu) across the Arabian Peninsula and the Abu Dhabi Crude Oil pipeline, these are limited in their capacity to replace the volume of oil transported through the Strait of Hormuz. ING analysts noted that unlike the Red Sea, there is no real substitute for the Strait, making it an irreplaceable channel for oil shipments.
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