Hormuz Strait Effectively Closed Despite No Legal Declaration

The Strait of Hormuz, a critical global shipping artery, has effectively ceased commercial traffic following Iran’s declaration of its closure and subsequent attacks on vessels. This unfolding crisis, which intensified after U.S. and Israeli strikes on Iran on February 28, has sent shockwaves through international energy markets, driving up oil prices and threatening liquefied natural gas (LNG) supplies, particularly for Asian economies. However, maritime legal experts confirm that despite Iran’s rhetoric and actions, no formal legal closure of the Strait has been declared, creating a complex and dangerous environment for global trade.

On Monday, a senior commander from Iran’s Revolutionary Guards stated that the Strait of Hormuz had been shut and warned that any vessel attempting transit would be targeted, as reported by Iranian media. This declaration followed earlier broadcasts on VHF Channel 16 and public statements by Ebrahim Jabbari, a senior adviser to the Commander-in-Chief of Islamic Revolutionary Guard Corps (IRGC), reiterating threats to attack and set ablaze any crossing ships. These threats have proven to be more than just words, with at least four ships struck in recent days, resulting in one seafarer’s death and injuries to four others.

Strait of Hormuz: Effective Closure Amidst Legal Ambiguity

Despite the explicit threats and kinetic actions, the legal status of the Strait of Hormuz remains ambiguous. The Joint Maritime Information Centre (JMIC) has upgraded its regional risk assessment to Critical—the highest level, indicating an attack is ‘almost certain’—but confirmed that ‘no formal legal closure of the Strait of Hormuz (SoH) has been declared.’ This distinction is crucial for the maritime industry, as it affects insurance coverage and crew rights. Menelaus Kouzoupis, a Dubai-based Partner at law firm Stephenson Harwood, noted that while the Strait remains legally open to international navigation, the sudden escalation has ‘materially altered the risk landscape for commercial shipping.’

This high-risk environment has led almost all shipowners and charterers to suspend transiting the Strait. Even those willing to take the risk face significant hurdles, as P&I Clubs (Protection and Indemnity Clubs) have reportedly withdrawn war risk cover, and crews, under International Bargain Forum (IBF) agreements, have the right to refuse to sail, with the International Transport Workers’ Federation (ITF) and the Joint Negotiating Group (JNG) designating the area as high risk. This effective closure, rather than a formal legal one, is the primary reason for the halt in commercial shipping.

Global Energy Market Disruptions and Oil Prices

The de facto blockade of the Strait of Hormuz, which facilitated roughly 13 million barrels per day (bpd) in 2025—about 31% of all seaborne crude flows—is causing significant upheaval in global energy markets. Global benchmark Brent crude was up 2.6% at around $80 per barrel on Monday, nearly 10% higher since the conflict began, and analysts predict a sustained closure could push oil prices past $100 per barrel, according to energy consulting firm Kpler. Beyond crude, approximately 20% of global liquefied natural gas (LNG) exports, primarily from Qatar, are also at risk. Qatar, one of the world’s largest LNG providers, halted production on Monday after Iranian drones struck its facilities at Ras Laffan Industrial City and Mesaieed Industrial City.

Asia’s Vulnerability to Hormuz Blockade

The impact of a prolonged closure is expected to be most acutely felt in Asia, given the region’s high dependence on energy imports from the Gulf. South Asia faces immediate physical strain, particularly concerning LNG supplies. Qatar and the UAE account for 99% of Pakistan’s LNG imports, 72% of Bangladesh’s, and 53% of India’s, as per Kpler data. Pakistan and Bangladesh, with limited storage and procurement flexibility, are especially vulnerable, potentially triggering ‘fast power-sector demand destruction,’ according to Kpler’s Katayama. India faces a dual physical and financial shock, with over half its LNG imports Gulf-linked and 60% of its oil imports from the Middle East, amplifying energy costs and current-account pressures.

China, the world’s largest crude oil importer and a major purchaser of Iranian oil, also has substantial exposure, with about 40% of its oil imports and 30% of its LNG imports passing through Hormuz. While China possesses significant LNG inventories and alternative supply options, a persistent outage would force it to compete for Atlantic cargoes, intensifying price competition across Asia. Japan and South Korea, which source 75% and 70% of their oil imports from the Middle East respectively, face severe price effects even without outright shortages. Thailand, with the biggest net oil imports in Asia at 4.7% of GDP, stands out as an ‘oil-price loser’ in Nomura’s framework, facing a large and immediate external hit.

Shipping Industry Navigates Elevated Risks

The maritime industry is grappling with unprecedented risk. The attack on the tanker Skylight on March 1, 5 nautical miles north of Khasab Port, Oman, injuring four of its 20 crew, underscored the tangible dangers. Even vessels traditionally associated with Iranian exports, such as the US-sanctioned tanker Blooming Dale, flagged by Winward senior maritime intelligence analyst Michelle Wiese Bockmann as entering the Strait, are not guaranteed safety. The reassessment of war risks by underwriters is leading to significant premium uplifts and potential loss of cover, making transit financially prohibitive even if technically possible. The situation highlights a critical challenge to the principle of freedom of navigation in international waters, with profound economic repercussions.

The current situation in the Strait of Hormuz represents a critical juncture where geopolitical tensions have translated into an effective blockade of a vital global trade route, demonstrating the significant economic leverage that non-state actors or states acting outside formal international legal frameworks can exert on global markets and supply chains. The distinction between a de facto and de jure closure underscores the evolving nature of maritime security challenges and the complexities of international response when traditional legal frameworks are bypassed by direct kinetic action.