The escalating conflict in the Middle East is prompting fresh concerns about global energy security. With oil prices rapidly fluctuating in response to dynamic events, markets are attempting to quantify the risks of oil and gas supply disruptions. All eyes are once again focused on the Middle East and Gulf energy exports.
Q1: What’s the worst-case scenario for energy security as the fighting in the Middle East escalates?
A1: The worst-case scenario for global energy security would be an Iranian-imposed physical cutoff of oil and gas shipping through the Strait of Hormuz, the only seaborne connection to global markets from the Middle East Gulf. On an average day, nearly 15 million barrels of crude oil and more than 4 million barrels of refined products pass through the Strait of Hormuz, along with 11 billion cubic feet of liquefied natural gas. These laden (fully-loaded) tankers exiting the Gulf are, of course, replaced each day with ballasting (empty) tankers heading into Gulf ports to load the next round of cargoes, making each ship twice a target for interruption.
Spare crude oil production capacity within the Organization of the Petroleum Exporting Countries—primarily Saudi Arabia and the United Arab Emirates (UAE)—stands at 4–5 million barrels per day (mb/d) and could theoretically replace a fraction of the 15 mb/d exported via the strait. But that extra oil would struggle to reach the market in a Strait of Hormuz shipping closure, as nearly all of Saudi Arabia’s and the UAE’s crude exports are loaded onto tankers inside the Gulf, upstream of the strait, which would be unusable in this scenario.
Q2: Can’t some of that Gulf oil bypass the Strait of Hormuz and still get to customers?
A2: Yes, but it can only accommodate a fraction of daily Gulf exports. Saudi Aramco’s East-West Pipeline connects the kingdom’s oil production centers in the Eastern Province with the Red Sea Yanbu Commercial Port. Barrels transported along the pipeline could bypass the Strait of Hormuz, but only in reduced volumes. The pipeline is believed to have a capacity of 5 mb/d. But it’s already supplying Yanbu with about 500 thousand barrels per day (kb/d) for export cargoes, and likely supplying six Saudi Aramco refineries in central and western Saudi Arabia with at least 1.8 mb/d. That would leave only about 2.7 mb/d of spare capacity in the pipeline, compared to Saudi Arabia’s typical 5.4 mb/d—enabling the rerouting of only half of its Gulf exports.
The UAE can likewise reroute about half of its 2 mb/d of Gulf exports via pipeline to its port of Fujairah on the Gulf of Oman, bypassing the Strait of Hormuz. Fujairah already accounts for about one-third of the UAE’s total 3 mb/d export volume.
Q3: How likely is a full Strait of Hormuz shutdown scenario?
A3: Because closing the Strait would also bring a halt to Iran’s 1.5 mb/d of oil exports, Tehran is unlikely to attempt such action unless in retaliation for a cutoff of Iran’s own oil exports—in other words, should it have nothing to lose. The most likely catalyst for this scenario is a military strike by Israel or the United States that disables Iran’s Kharg Island export facility (we analyzed this scenario in our June 16 commentary). A naval blockade, imposed by U.S. and coalition navies, could also potentially throttle or sever Iran’s oil exports, thus pushing Tehran to attempt closure of the Strait of Hormuz.
Q4: So, if Iran’s oil exports remain online, the oil disruption threat is minimal?
A4: No, only the total Gulf shutdown threat is minimal. Iran could disrupt oil flows from the Gulf in several other ways. The most likely is covert Iranian attacks on seaborne oil and gas transportation. This could transpire if the regime remains on solid footing and chooses to up the ante while maintaining some degree of plausible deniability—or at least seeks to minimize traceability back to Tehran. This scenario could also occur in the context of an internecine power struggle among competing factions—imagine one or more units of the Iranian Revolutionary Guard Corps going rogue in order to scuttle a moderate approach to diplomatic negotiations.
Iran and its Yemen-based Houthi allies have a long history of deploying explosive underwater mines to damage commercial shipping vessels. These mines are easily deployed, both underwater and attached to the hulls of passing ships, and can be laborious for allied naval forces to neutralize. Fast-attack naval craft (gunboats) can also pose a serious hazard to oil and gas tankers; hit-and-scatter ambushes could be hard to prevent, while Iran and proxies can operate small craft from low-maintenance or temporary shore facilities.
Iran could also try to directly attack ships delivering oil to adversary countries like the United States, the United Kingdom, France, and Germany. But these westbound flows are small (less than 10 percent of the total), and the risk of misidentification (inadvertently attacking other ships) is high. As such, even a campaign to selectively target Western oil cargoes would cause many or most ships to avoid the area, effectively disrupting the flow of oil around the world.
Clayton Seigle is senior fellow and James R. Schlesinger Chair in Energy and Geopolitics at the Center for Strategic and International Studies in Washington, D.C.
