Strait of Hormuz tensions shake global trade and energy markets

Stephen Grootes speaks to Timothy Walker, Senior Researcher and Maritime Project Leader for the Institute for Security Studies about the impact of the Iran conflict on global maritime trade and energy markets.

Listen to the interview in the audio player below.

Rising tensions in the Middle East are sending shockwaves through global shipping and energy markets, as major container lines suspend routes through one of the world’s most important sea passages.

Following military strikes involving the U.S., Israel and Iran, global shipping companies have paused operations through the Strait of Hormuz, a narrow stretch of water that carries a significant share of the world’s oil and gas supplies.

The Strait of Hormuz lies between Iran and Oman and connects the Persian Gulf to the open ocean. It is widely seen as the most important oil 'chokepoint' in the world.

Roughly 20% of global oil consumption passes through this narrow corridor every day. Large volumes of liquefied natural gas (LNG) also travel this route, particularly from Gulf producers supplying Europe and Asia.

If ships cannot safely pass through, even for a short time, global energy markets react immediately.

Speaking to Stephen Grootes on The Money Show, Timothy Walker, a senior researcher and maritime project leader for the Institute for Security Studies says many ships would not feel comfortable passing through the Strait of Hormuz.

"The war insurance which a lot of ships would rely on as a guarantee for them if they were to be affected by it in some way by a mine or a missile would cover their losses has been cancelled for many, and the costs now of taking on new insurance is too much."

- Timothy Walker, senior researcher - Institute for Security Studies

"Some of the shipping companies have already started indicating that they won't go through the Red Sea because of this incident. Maersk, CMA CGM, two of the biggest shipping companies in the world have already indicated that they're going to cancel some of their trans-Suez routes."

- Timothy Walker, senior researcher - Institute for Security Studies

"The proximity, for instance of the Houthis to the Red Sea transit passage and the fact that they are aligned with Iran means that the risk is seen as too high."

- Timothy Walker, senior researcher - Institute for Security Studies

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