Congressional Research Service: Iran Conflict and the Strait of Hormuz — Oil and Gas Market Impacts

Institution: Congressional Research Service (CRS)

Date: Updated August 4, 2025

URL: https://crsreports.congress.gov/product/pdf/R/R45281

File: crs-iran-hormuz.pdf

Summary

This CRS report, updated August 4, 2025 (prior to the February 2026 closure), provides comprehensive background on Iran's military capacity to close the Strait of Hormuz, the market impacts of such a closure, U.S. sanctions history, and the geopolitical context. It serves as essential pre-shock context, documenting that ~27% of global maritime oil trade and 22% of global LNG trade transit the Strait. The report was prepared in the context of the June 2025 U.S.-Iran conflict and analyzes why markets ultimately did not see a complete closure at that time.

Key Findings

1. **Strait volume and share:** During 2024, approximately **20 million barrels per day** of oil (crude + petroleum products) moved through the Strait of Hormuz, representing **~27% of global maritime oil trade** and roughly **20% of world petroleum liquids consumption**. (CRS R45281, citing EIA data)

1. **LNG transit share:** Approximately **22% of global LNG exports** transit the Strait, primarily from Qatar and the UAE. Most Qatari exports go to Asian markets, including China (24% of Qatari exports). (CRS R45281)

1. **Alternative pipeline capacity (combined):** Saudi Arabia's East-West Pipeline (Petroline) plus the UAE Abu Dhabi crude oil pipeline to Fujairah have approximately **2.6 million barrels per day of combined bypass capacity**. (CRS R45281, citing EIA)

1. **IEA emergency oil stocks:** IEA government-controlled stocks were more than **1.2 billion barrels** at end of Q1 2025, including ~400 million barrels in the U.S. Strategic Petroleum Reserve. Maximum achievable drawdown rate is up to **24 million barrels per day for two months**. Emergency stocks would be exhausted in approximately six months. (CRS R45281)

1. **IEA spare production capacity:** As of May 2025, the IEA estimated available spare crude oil production capacity of approximately **5.4 million barrels per day**, with more than **90% located in Middle East countries that export through the Strait** — limiting its effectiveness to address disruptions in the region. (CRS R45281)

1. **Iran's military mining capacity:** Estimates place Iran's naval mine inventory at approximately **6,000 mines** (up from 5,000+ in 2019), including limpet mines, moored mines, and bottom mines. (CRS R45281)

1. **Iran's anti-ship weapons:** Iran has shore-based anti-ship cruise missiles (ASCMs), anti-ship ballistic missiles (ASBMs), fast inshore attack craft, and submarines. The IRGC deployed missile systems on three disputed Gulf islands in March 2025. (CRS R45281)

1. **1980s Tanker War analog:** During the Iran-Iraq War tanker war, Iranian forces laid mines throughout the Persian Gulf, including in the Strait. U.S. operations to counter Iranian threats included Operation Earnest Will (July 1987–September 1988), Operation Prime Chance, Operation Nimble Archer, and Operation Praying Mantis (April 1988) — the largest U.S. Navy surface action since WWII. (CRS R45281)

1. **June 2025 conflict — market behavior:** Although oil prices initially rose during the June 2025 U.S.-Iran conflict, they fell below pre-conflict levels by late June. CRS assessed that market participants concluded Iran would not curtail supply by closing the Strait. Iran parliament voted to support closure on June 23, 2025, but a final decision required Supreme National Security Council and Supreme Leader approval — which was not granted. (CRS R45281)

1. **Why Iran may avoid closure:** Iran itself depends on Gulf oil exports (mostly to China). Iran has no quick reroute options. Closure would likely trigger U.S. military action to restore shipping. It could alienate Gulf neighbors and Iran's own oil customers. (CRS R45281)

1. **Natural gas — no strategic reserve analog:** Most major gas-consuming countries do not have a strategic natural gas reserve comparable to petroleum reserves. A decrease in gas flow through Hormuz cannot be mitigated by a strategic gas release. Most LNG terminals already operate at very high capacity utilization. (CRS R45281)

1. **U.S. sanctions on Iran:** The U.S. has targeted Iran's petroleum sector with increasingly broad sanctions since 1995, including secondary sanctions on third parties. In late 2024, Treasury added Iran's petroleum and petrochemical sectors to sanctions under E.O. 13902. In February 2025, NSPM 2 directed a "maximum pressure" campaign seeking to drive Iran's oil exports to zero, including to China. (CRS R45281)

1. **Middle East energy infrastructure share:** The Middle East hosts >30% of world crude oil production, >90% of standby crude oil production capacity, ~11% of refining capacity. More than 40% of global crude oil exports and >20% of oil product exports depart from the broader Middle East. (CRS R45281)

Entities Mentioned

• **Organizations:** Congressional Research Service (CRS), U.S. Energy Information Administration (EIA), International Energy Agency (IEA), U.S. Department of the Treasury/OFAC, IRGC (Islamic Revolutionary Guard Corps), IRGC Navy (IRGCN), Islamic Republic of Iran Navy (IRIN)
• **Places/Countries:** Iran, United States, Israel, Saudi Arabia, UAE, Qatar, Kuwait, Iraq, Oman, China, Japan, South Korea, India, Yemen (Houthis), Russia, Ukraine
• **Ports/Facilities:** Strait of Hormuz, Persian Gulf, Gulf of Oman, Kharg Island (Iran's primary oil terminal), Bandar Abbas, Yanbu (Red Sea), Fujairah (Gulf of Oman), Bab el-Mandeb, Suez Canal
• **Infrastructure:** East-West Pipeline (Petroline), Abu Dhabi-Habshan-Fujairah Pipeline, Nord Stream, Yamal pipeline, TurkStream
• **Numbers:** 20 mbd (Hormuz oil volume 2024), 27% (global maritime oil trade share), 22% (global LNG trade share), 2.6 mbd (combined bypass pipeline capacity), 1.2 billion barrels (IEA government-controlled stocks), 400 million barrels (U.S. SPR), 24 mbd (max IEA stock drawdown rate), ~6 months (time to exhaust emergency stocks), 5.4 mbd (IEA spare production capacity), ~6,000 (Iranian naval mines), >90% (of IEA spare capacity in Strait countries), >30% (Middle East share of world crude production), >40% (Middle East share of global crude exports)

Relevance to Q1/Q2/Q3

• **Q1 (Hormuz closure extent):** High relevance — documents pre-crisis baseline volumes (20 mbd, 27% of maritime trade), Iran's military capabilities (6,000 mines, ASCMs, ASBMs), why the June 2025 closure did not materialize, and alternative bypass capacity (2.6 mbd)
• **Q2 (Price impact):** Medium relevance — provides IEA emergency response capacity context (1.2B barrels, 24 mbd drawdown max), notes that a "prolonged disruption... would create oil market conditions for which there is no historical precedent"
• **Q3 (Europe gas/security):** Medium relevance — documents Europe's LNG dependency via Hormuz (Qatar, UAE), the absence of a strategic gas reserve mechanism, and LNG terminal capacity constraints

Quotes

"Prohibiting all oil shipments through the Strait of Hormuz would materially affect global oil supply and could result in rapid price escalation for crude oil and petroleum products as buyers looked to source oil from other suppliers, commercial inventories were drawn down, and markets sought price equilibrium." — CRS R45281, August 2025

"A decrease in the flow of natural gas could not be mitigated by a release from a strategic natural gas reserve. Output could be increased from liquefaction plants at LNG terminals outside of the Persian Gulf, but most LNG terminals already operate at a very high percent of capacity because of the cost of construction." — CRS R45281, August 2025

"There appears to be a consensus that the U.S. military has the capacity to counter Iran's forces and restore the flow of shipping, if necessary. However, such an effort would likely take some time — days, weeks, or perhaps months — particularly if a large number of Iranian mines needed to be cleared from the Gulf." — CRS R45281, August 2025

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• [[Q2-PRICE-IMPACT]]
• [[Q3-EUROPE-IMPACT]]
• [[EIA-STEO-April-2026]]
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