Why the Strait of Hormuz is losing importance

For decades, American presidents sought to avoid direct conflict with Iran. A significant part of their calculus was how a tiny waterway abutting its shores could be easily blocked, and how nearby nations that send one-fifth of the world’s oil and natural gas through it could see their energy infrastructure damaged or destroyed.

Not being one of those presidents, Donald Trump on Feb. 28 joined Israel in attacking Iran, and those historical fears were quickly realized. But yet, the disruption of the Strait of Hormuz and Iranian strikes on Persian Gulf nations haven’t triggered the catastrophically high oil prices previously foreseen. So what happened? In this weekly documentary, we explain the reasons for this surprise, and how they may indicate the world is approaching “peak Hormuz.”

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When the bombing began 4 ½ months ago, the world was already awash in oil. Add to that the coordinated release of brimming reserves and, most importantly, how major fossil fuel buyer China stayed on the sidelines, and you have a few clues. Meanwhile, two major oil producers in the Middle East began to make more use of cross-desert pipelines that avoid the fraught strait altogether.

The unexpected resilience of markets has other explanations, but together they all force a bigger question: Does the world simply wait for the critical waterway to normalize? Or will nations double down on alternative routes, bulk up their inventories and broaden their supply systems to hedge against future risks? With the ability to choke energy flows through the Strait of Hormuz no longer geopolitical theory, the answer arguably seems clear.