On June 22, 2025, Iran’s parliament overwhelmingly approved a motion to legally close the Strait of Hormuz—the first time since 1972—with final authority now resting with Iran’s Supreme National Security Council, whose decision must also be sign‑off by Supreme Leader Khamenei.
Why it matters:
- The Strait of Hormuz is a narrow maritime chokepoint between Oman and Iran, handling about 20% of the world’s daily oil consumption (17–19 million barrels/day).
- A closure would disrupt around $1 billion in daily oil trade, triggering a sharp surge in oil prices.
- JP Morgan warns that oil could leap to $120–130/barrel—or even $150–200/barrel if the shutdown persists—potentially pushing US CPI inflation toward 5%.
What triggered it:
This escalation comes after coordinated US airstrikes targeting three Iranian nuclear sites—Fordow, Natanz, and Isfahan—prompting a swift parliamentary reaction.
Energy & Economic Impact
No viable maritime alternative exists. Regional oil exporters like Saudi Arabia, Kuwait, Qatar, Bahrain, and most of Saudi’s output must transit through Hormuz.
While some production (~6.5–7.5 million b/d) could be rerouted via pipelines (e.g., East–West pipeline across Saudi), that still leaves a ~65% drop in flows (~13% of global supply).
Price & inflation outlook:
Oil prices have already climbed ~$20 from April lows, potentially adding ~0.4% to CPI. Another $100/barrel jump could push inflation toward or above 5%, a level not seen since March 2023. The Federal Reserve may feel compelled to resume rate hikes to counter inflationary pressures.
Geopolitical Fallout
US Fifth Fleet and allied navies are actively monitoring the Strait. Iran has historically used asymmetric tactics like naval mines, fast boats, drones, and shore-based missiles to sew disruption—strategies likely to be revived.
The UK, EU, UN, and nations such as China and Japan are urging diplomatic restraint and have condemned the US strikes. Russia strongly condemns the US strikes and warns of dangerous escalation.
Dmitry Medvedev, deputy chair of Russia’s Security Council, alleged that “a number of countries are ready to supply Iran with their own nuclear warheads,” also claiming the US strikes will accelerate Iran’s nuclear weapons efforts.
Market & Investor Watch
Oil market signals:
– Since June 13, tanker traffic through the Strait has slowed, though no closure has been enforced yet.
– Brent futures have climbed over 10%, hovering around $77/barrel pre-closure.
– Since April 9, oil is up ~35%, excluding the potential closure impact—volatility remains high.
Financial implications:
– Expect turbulence across equities, commodities, and bond markets, with inflation and geopolitics driving trader positioning.
– Central banks, especially the Fed, face policy dilemmas: tame inflation could require tightening even as growth slows.
What’s Next?
- Security Council decision & Khamenei’s response — final closure requires their approval; timeline could be hours or days.
- Immediate oil response — rapid price spikes as next oil markets open; global consumers brace for higher fuel and inflation.
- Diplomatic backlash — major powers may push for de-escalation; potential UN Security Council session ahead.
- Military posturing — naval deployments may increase; Iran’s A2/AD strategy may target shipping lanes.
- Nuclear escalation — Iran deepens defense ties with Russia; nuclear proliferation risks intensify if warheads materialize.
Bottom Line
This move marks the first legal attempt since 1972 to shut the Strait of Hormuz. If enforced, it could reshape global energy dynamics, exacerbate inflation, and intensify US‑Iran‑Russia rivalry. Market volatility will accelerate, and central banks stand at a critical crossroads.
The world now watches Tehran’s next move — and the global ripple effects that may follow.
