Strait to the Problem (7/8/25)

Ellie Thornton

Hello and welcome back to Milestones Behind the Freight Curtain! From London, I’m Ellie Thornton, and as always, I’m joined by the man, the legend, Professor Steve DeNunzio. Steve, how are you holding up with all this news flying around?

Steve DeNunzio

Hey Ellie, I’m good, but wow, it’s been a wild week, hasn’t it? I mean, the Strait of Hormuz is back in the headlines, and not in a good way. Let's get... straight to it!

Ellie Thornton

Oh, brother. No dad jokes so soon! Yeah, it’s like every time you think things can’t get more tense, something else happens. So, for anyone who’s just catching up, Iran’s been loading sea mines onto vessels in the Gulf, right after that Israeli pre-emptive strike. And now, their parliament’s actually approved closing the Strait of Hormuz if they want to. That’s, like, not just saber-rattling anymore.

Steve DeNunzio

Exactly. And just to put it in perspective, the Strait of Hormuz is this tiny, 21-mile-wide bottleneck, but it’s responsible for, what, 20 to 30 percent of the world’s oil and gas flows? That’s massive. I always tell my students, if you want to see a real global chokepoint, look at Hormuz.

Ellie Thornton

It’s crazy, isn’t it? I mean, you’ve got oil from Kuwait, Iraq, Saudi Arabia, Qatar, the UAE, all funneling through there. And even Iran’s own exports. Plus, about a fifth of global liquefied natural gas, mostly from Qatar, goes through that same stretch. It’s like, if you wanted to design a single point of failure for the world’s energy, you’d probably end up with something like this.

Steve DeNunzio

Yeah, and the thing is, this isn’t the first time Iran’s threatened to close it. I remember back in 2011, there was all this talk about blocking the Strait if sanctions got worse. The logistics world was on edge. Everyone was running scenarios, trying to figure out how to reroute, what would happen to insurance and all that. But, you know, they never actually followed through. It was a lot of posturing, but the risk was real enough that people took it seriously.

Ellie Thornton

And now it feels like we’re right back there, but maybe even more serious. I saw a former British military intelligence officer on the BBC saying that if Iran actually did it, the economic shock would make what happened after Russia invaded Ukraine look like, um, “small change.” That’s a bit terrifying, honestly.

Steve DeNunzio

Yeah, and it’s not just the West that’s worried. China, for example, gets a huge chunk of its oil through Hormuz. So, if Iran really did close it, they’d be hurting their own allies, not to mention their own economy. It’s a high-stakes game of chicken, and, uh, I’m not sure anyone really wins if it goes off the rails.

Ellie Thornton

Totally. And, like, the international law side—the UN Convention on the Law of the Sea and all that—says you can’t just block a strait like this. But, you know, that doesn’t always stop people from trying. It’s just, the consequences are so huge, it’s hard to imagine anyone actually pulling the trigger. But then again, here we are, talking about it because it’s not impossible.

Steve DeNunzio

So, let’s talk about what happens if things really go sideways. I mean, even just the threat has already sent oil prices up—Brent crude jumped, what, 10% since the start of the hostilities? That’s a big move in a short time.

Ellie Thornton

Yeah, and it’s not just oil, right? Insurance costs for ships go up, rerouting gets expensive, and suddenly you’ve got this ripple effect through the whole supply chain. I was reading that some analysts think oil could hit $100 a barrel if Iran actually blocks the Strait. That’s, like, 30 bucks higher than where it was just a few weeks ago.

Steve DeNunzio

And the US, even with record oil production, can’t just fill that gap. We’re talking about 20 million barrels a day moving through Hormuz. There’s no way to replace that overnight. Plus, most of that oil is headed to Asia—China, India, South Korea. So, those economies would feel it first, but, you know, oil’s a global market. If prices spike in one place, everyone pays more.

Ellie Thornton

Exactly. And remember like 2019? When those tankers were attacked—one from the Marshall Islands, one from Panama (one of your favorite places), and then a few others the month before? The US blamed Iran for those, and even though the Strait wasn’t closed, it was enough to send everyone scrambling. I remember UK retailers were suddenly trying to lock in inventory, just in case. It was chaos for a bit.

Steve DeNunzio

Yeah, and it’s not just oil. If natural gas shipments get delayed, you get knock-on effects—fertilizer shortages, higher food prices, maybe even unrest in places that rely on those imports. The “ton mile” cost goes up, too. That’s, uh, how many miles you have to move a ton of oil or gas, and if you have to go around Africa or find other routes, it gets expensive fast.

Ellie Thornton

And then you’ve got the financial markets, right? Wall Street’s in what they’re calling “extreme greed” mode—everyone’s piling into oil futures, gold, silver, anything that looks like a safe haven. It’s a bit of a feeding frenzy, honestly. And, like, the FTSE 100 dropped just on the threat of closure. It’s not even happened yet!

Steve DeNunzio

Yeah, and I think it’s worth saying, too, that some countries have diversified a bit. India, for example, says they’ve got more routes now, and their oil companies have a few weeks’ supply. But, you know, that only goes so far. If this drags on, everyone’s going to feel it, one way or another.

Ellie Thornton

And, like, even if you’re not in the oil business, you’re gonna see it at the pump, or in your energy bill, or in the price of, I dunno, groceries. It all connects. We talked about this in our spot rate episode, right? How one disruption can ripple through the whole system. This is that, but on steroids.

Steve DeNunzio

So, with all this at stake, it’s no surprise the world’s weighing in. The US, China, the UK, the EU—they’re all warning Iran not to go through with it. I mean, the UN Law of the Sea is pretty clear, but, uh, enforcement is another story. Still, there’s a lot of pressure on Iran not to escalate.

Ellie Thornton

Yeah, and it’s interesting, isn’t it? Like, China’s actually calling for de-escalation, because they need that oil as much as anyone. And the US is, well, let’s just say, not mincing words. I saw Secretary Rubio basically say it’d be “economic suicide” for Iran to close the Strait, and that the US has options if it happens. That’s pretty blunt.

Steve DeNunzio

Right, and there’s a real calculation here. Iran could do targeted attacks—like, hit a few ships, keep everyone nervous, but not actually close the Strait. That’s probably more likely than a full blockade, because, honestly, a total closure would hurt Iran as much as anyone. Their own exports go through there, and their main customer is China. So, it’s a risky move.

Ellie Thornton

And, like, the military side—there’s a big US naval presence in the region, and, um, if Iran tried to mine the Strait or block it, you’d probably see a response. But it’s not just about ships and planes, is it? There’s a whole diplomatic game going on, too. The EU’s saying it’d be “extremely dangerous and not good for anybody.” Which, yeah, understatement of the year.

Steve DeNunzio

Yeah, and, you know, in one of my logistics classes, we actually run a simulation on what happens if the Strait gets blocked. It’s always chaos—supply chains grind to a halt, prices spike, and everyone’s scrambling to find alternatives. It’s a good reminder that, uh, even the threat of closure is enough to keep the whole world on edge.

Ellie Thornton

And, like, we’ve seen this before, right? The COVID-19 Pandemic, disruptions in the Red Sea, or when Russia invaded Ukraine—supply chains are more fragile than we like to admit. I guess the big question is, can the world actually work together to keep things moving, or are we just gonna keep lurching from one crisis to the next?

Steve DeNunzio

That’s the million-dollar question, Ellie. I mean, if there’s one thing we’ve learned from all these episodes, it’s that resilience and flexibility are everything. Whether it’s robots on the loading dock or geopolitical shocks, you gotta be ready to adapt.

Ellie Thornton

Absolutely. And, um, I think that’s a good place to leave it for this week. We’ll be watching the Strait of Hormuz, and, honestly, hoping for the best. Professor, thanks for another great chat.

Steve DeNunzio

Thanks, Ellie. Always a pleasure. And thanks to everyone listening—stay tuned, because I have a feeling we’ll have plenty more to talk about next week.

Ellie Thornton

Yeah, the "news on Hormuz"! We’ll see you next time on Milestones Behind the Freight Curtain. Au revoir, everybody!

Steve DeNunzio

Take care, everyone!