For decades, the world has been hyper-focused on the potential for disruption to the oil market should the Strait of Hormuz be closed to tankers. That’s understandable: a fifth of global oil transits through the narrow waterway bordered by Iran, compared to perhaps 3 per cent of global gas consumption.
But such statistics belie the fact that it is gas, rather than oil, that is most exposed to the Strait’s closure. Indeed, spot gas prices at the European TTF hub were up over 40 per cent on Monday after Iranian attacks caused Qatar to shut down production facilities, while benchmark Brent crude is barely up 6 per cent.
Export figures via the Strait vastly underplay its importance to the gas market. Most gas is either consumed where it is produced or piped relatively short distances. Only 10-15 per cent is turned into supercooled fuel that can be loaded on to tankers and freely traded. So the roughly 3 per cent of global gas consumption that travels through the Strait — 86mn tonnes a year of mainly Qatari liquefied natural gas, according to S&P data — is equivalent to about a fifth of the seaborne market on which countries such as China, Japan and the European Union rely.