Sandwiched between the Persian Gulf and the Gulf of Oman, the Strait of Hormuz is the only sea passage connecting the Persian Gulf to the open ocean. In other words, it is the lifeline of the Arab world, the most notable among them being Kuwait, Saudi Arabia, Bahrain, Qatar, and the United Arab Emirates.
Although the narrowest point in the strait is just 33km wide, the shipping lanes in both directions are only 3km wide.
If you’ve been following maritime incidents, you’d know that this Strait is in the frontline when it comes to the battle between Iran and the United States. So much so that the United States Fifth Fleet, based in Manama, Bahrain, is responsible for protecting maritime shipping lanes in this region.
Read about how the COVID19 pandemic induced the biggest oil price crash in history. And what is the impact on maritime shipping?
Economists are already referring to the global slump brought about by the coronavirus as the world’s worst-ever economic downturn – a “Greater Depression” that’s even worse than the Great Depression in 1929-32. With lockdowns, closed frontiers and stay-home restrictions reducing road, rail and air traffic to an absolute minimum and economic activity having slowed down to an almost standstill the world over, the global demand for oil has fallen through the floor. On April 20 the price of the May futures contract for West Texas Intermediate (WTI) plunged to never-experienced negative territory of minus $40. In other words, US oil producers actually had to pay people to buy or store their oil. Since that historic low, the price of WTI and Brent crude has recovered somewhat but still remains at levels not seen for decades. It’s a simple equation, basic supply-and-demand economics. With supply significantly outpacing demand in the global oil market, the price of “black gold” has slumped.