Iran’s Threats, the Strait of Hormuz, and Oil Markets: In Brief

Summary

The exchanges of threats between members of the governments of Iran and the United States, including the presidents of both countries, have again raised the specter of an interruption of shipping through the Strait of Hormuz (the Strait), a key waterway for the transit of oil and natural gas to world markets. In the first half of 2018, approximately 22 million barrels per day (bpd) of crude oil, condensate, and petroleum products, and over 300 million cubic meters per day in liquefied natural gas (LNG) exited the Strait, representing approximately 24% and 3% of global production, respectively.

With the U.S. withdrawal from the Joint Comprehensive Plan of Action (JCPOA) on May 8, 2018, there may be increased potential for Congress to consider legislation regarding sanctions on Iran. A number of bills, mostly prior to the May 8 withdrawal, have been introduced in the 115th Congress targeting aspects of Iran’s leadership, military, and economy. It remains uncertain whether reinstated U.S. sanctions based on the U.S. unilateral exit from the JCPOA will damage Iran’s economy to the extent sanctions did during 2012-2015, when the global community was aligned in pressuring Iran.