As tensions escalate between Israel and Iran, Iran's mention of a blockade of the Strait of Hormuz has the refining, petrochemical, and aviation industries on edge. The Strait of Hormuz is where about 20% of the world's maritime crude oil transport passes, and approximately 70% of the crude oil entering Korea transits through this route. If Iran blocks the Strait of Hormuz, there is a high likelihood of disruptions to crude oil supply, causing prices to rise.
According to reports from Reuters and other foreign media on the 16th, Esmail Qasemi, a member of the Iranian Parliament's National Security Committee, said in an interview with the Iranian state IRINN television channel, "We are seriously considering a blockade of the Strait of Hormuz following the conflict with Israel."
The Strait of Hormuz, located between Iran, Oman, and the United Arab Emirates (UAE), is a major oil transport route in the Middle East and a strategic chokepoint. Its total width is 55 kilometers, but in areas deep enough for large oil tankers, all within 10 kilometers are under Iranian territorial waters.
On the 13th, as the possibility of a blockade of the Strait of Hormuz was raised due to Israel's attacks on Iran, both West Texas Intermediate (WTI) crude oil futures and North Sea Brent crude oil futures spiked by about 13% at one point.
Experts believe the likelihood of a full blockade becoming a reality is low. If the Strait of Hormuz were blocked, the skyrocketing oil prices could cause problems in Iran's relations with China, its largest oil exporter. About 90% of Iran's exported oil goes to Asia, with China accounting for most of that.
If problems arise with China, Iran's largest trading partner amidst U.S. economic sanctions, it would block the inflow of essential goods needed domestically. Although Iran has threatened to blockade the Strait of Hormuz multiple times in the past, it has never attempted it directly.
However, there is a possibility that Iran could delay logistics by tightening inspections under the pretext of safety. Iran is a signatory to the "innocuous passage" treaty, which guarantees freedom of navigation as long as there is no threat to peace and safety, but merely strengthening inspections of vessels passing through the strait could delay cargo traffic. In the past, Iran has detained ships for reasons such as marine environmental pollution.
The domestic refining industry is closely monitoring the situation, but it believes there will not be any problems with supply and demand in the short term. Currently, Korea has secured about 200 days' worth of stored oil, including government reserves and private holdings. If government reserves fall below 90 days' worth, policies to reduce fuel consumption, such as odd-even vehicle regulations, may be implemented.
The gas industry is in a worse position than the refining industry. Liquefied natural gas (LNG) is more difficult to store than oil, and the domestic LNG reserves amount to only about 10 days' worth. If the transport routes for LNG carriers are blocked, the gas supply could become problematic, as about 30% of domestic LNG is dependent on the Middle East.
The petrochemical industry, which is experiencing a downturn due to oversupply from China, and the aviation industry, which is burdened by rising jet fuel costs, are also expected to be hit hard by a rise in oil prices, prompting them to keep an eye on the situation of military conflict.