Fact Check: Oil prices could skyrocket to $120 if Iran closes the Strait of Hormuz.

Fact Check: "Oil prices could skyrocket to $120 if Iran closes the Strait of Hormuz."

What We Know

The Strait of Hormuz is a critical maritime passage through which approximately one-third of the world's seaborne oil trade flows. Analysts have indicated that if Iran were to close this strait, it could lead to significant disruptions in global oil supply. According to Deutsche Bank, if Iran were to block the strait for two months, oil prices could soar to as high as $124 per barrel. Similarly, experts from Fox Business have noted that disruptions in this key shipping route could push prices to $120 per barrel. The Energy Information Administration has also emphasized the importance of this waterway, stating that it is one of the world's most significant oil chokepoints.

Analysis

The claim that oil prices could reach $120 per barrel if Iran closes the Strait of Hormuz is supported by multiple credible sources. Deutsche Bank's assessment, which suggests a potential price spike to $124 per barrel, is based on the premise that such a closure would significantly disrupt oil supplies, leading to increased prices due to scarcity (source-2). Furthermore, the ExxonMobil CEO echoed this sentiment, highlighting that while global oil supply may be sufficient to absorb some disruptions, the real concern lies in the potential impact on shipments through the Strait of Hormuz.

However, some analysts caution against overestimating the likelihood of a complete closure. For instance, Helima Croft, a global commodity strategist, mentioned that while the risk of a supply outage is increasing, a full closure of the strait would be "exceedingly difficult" to maintain for an extended period. This perspective suggests a nuanced understanding of the geopolitical dynamics at play, as any attempt by Iran to close the strait would likely provoke a response from the United States and other nations.

The reliability of the sources cited is generally high, as they include major financial institutions and news organizations with expertise in energy markets. However, the potential for bias exists, particularly in the context of geopolitical tensions, which can influence market perceptions and analyst forecasts.

Conclusion

The claim that "oil prices could skyrocket to $120 if Iran closes the Strait of Hormuz" is True. Multiple credible sources indicate that such a closure would likely lead to significant disruptions in oil supply, resulting in a substantial increase in prices. While there are differing opinions on the likelihood and duration of a closure, the potential impact on oil prices is widely acknowledged among industry experts.

Fact Check: Oil prices could skyrocket to $120 if Iran closes the Strait of Hormuz.