A closed Strait of Hormuz was once unthinkable
Summary
The Strait of Hormuz, a crucial waterway for global oil and natural gas shipments, has experienced a closure that was previously considered unlikely and not planned for. Experts had not fully prepared for a total shutdown because it was seen as too extreme and difficult to manage, making the current situation unprecedented.Key Facts
- The Strait of Hormuz is vital for global energy, handling about 20% of the world’s oil and liquefied natural gas.
- Past studies in 2007 and 2022 considered but ultimately rejected planning for a full closure of the strait.
- Experts viewed a total shutdown as too unlikely and economically catastrophic to take seriously at the time.
- The concept of rare but extreme risks overwhelming normal planning is linked to an economic theory called the "dismal theorem."
- Current oil prices have risen significantly, reaching around $126 per barrel amid the ongoing crisis.
- The International Energy Agency (IEA) has included potential closures of the strait in some emergency plans but sees global coordination as essential for a full shutdown response.
- The situation is unprecedented and requires new approaches since previous crisis models did not fully address a full closure.
- Militaries and governments are currently more engaged with the evolving risks to this key shipping route.
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