Iran warns Strait of Hormuz closure risks 20% of global oil supply

Iran said it will not allow the Strait of Hormuz to be used as a threat against the country, the latest escalation in a conflict that has already disrupted the waterway through which one-fifth of the world's oil passes.

Iran's declaration that it will not tolerate the Strait of Hormuz being used as a threat against the country pushed crude prices higher Monday, deepening a geopolitical crisis that has already removed millions of barrels from global markets.

"This is a direct challenge to the U.S. commitment to keep the strait open, and it raises the probability of a sustained disruption that markets haven't fully priced," said Elena Fischer, geopolitical risk analyst at Edgen. "The difference this time is that both sides have already demonstrated willingness to strike."

Brent crude rose 4.2% to $79.08 a barrel in early Asian trading, while WTI climbed 4.1% to $74.35, extending an 8% surge from last week after President Donald Trump declared the June ceasefire agreement effectively dead. U.S. stock futures slid, with Nasdaq 100 contracts falling 0.72%, as the 10-year Treasury yield held near 4.59%. Gold edged lower to around $4,075 an ounce as the dollar strengthened on safe-haven flows.

The standoff threatens to sever the Strait of Hormuz — through which roughly 20% of global oil supply transits — at a moment when the June memorandum of understanding designed to keep shipping lanes open has all but collapsed. With Iran's new Supreme Leader Mojtaba Khamenei vowing retaliation for his father's killing in February U.S.-Israeli airstrikes and Trump warning of "1,000 missiles" locked and loaded, the margin for miscalculation has narrowed to near zero.

Iran's official statement, carried by state media on Sunday, said the country "will not allow the strait to become a threat to Iran," without specifying what actions it might take. The Islamic Republic News Agency separately declared all transit through the waterway "temporarily unavailable" following what it called "unlawful activities by U.S. naval forces," though Trump disputed the closure, insisting the route remained open to commercial traffic.

The conflicting claims underscore the fragility of a situation that has already drawn direct military engagement. U.S. Central Command said late Sunday it launched fresh strikes against Iranian targets "to continue degrading their ability to attack civilian mariners and commercial ships." The strikes followed attacks on multiple vessels near the strait, including a Qatari LNG tanker and a Saudi crude tanker, according to shipping reports.

The Oil Premium

The crisis has added a sustained geopolitical premium to crude that analysts say could persist as long as the strait remains contested. The last time a similar threat materialized — during the 2019 tanker attacks in the Gulf of Oman — oil prices spiked roughly 15% over two weeks before stabilizing. This time, the scale is larger: the February airstrikes that killed Ayatollah Ali Khamenei triggered a broader war that has already disrupted shipping for months, and the June truce that briefly reopened the strait has now unraveled.

For global markets, the transmission is direct. Higher crude prices feed into gasoline costs, raising inflation expectations and pushing bond yields higher. The 10-year Treasury yield has climbed to 4.59%, near its highest since May, as traders price in the inflationary impact of sustained $75-plus oil. Asian equity markets opened lower Monday, with South Korea's KOSPI falling more than 2% and China's Shanghai Composite dropping about 1%.

What Comes Next

Diplomatic channels remain open — Oman has continued mediating between the two sides — but the rhetoric on both sides has escalated beyond what preceded the February strikes. Khamenei's pledge of revenge, delivered during funeral ceremonies for his father, has been matched by Trump's warning that any assassination attempt would trigger a response that could "decimate and destroy" Iran.

For investors, the key question is whether the conflict remains contained to the strait or expands into a broader regional war. Either scenario carries implications for oil, shipping costs, defense stocks, and the inflation outlook that will shape central bank policy in the second half of the year.

This article is for informational purposes only and does not constitute investment advice.