As tensions flare again between Iran, Israel and the US, social media, especially on crypto-social media X (or Crypto Twitter), fear that Tehran may close the Strait of Hormuz, a key oil choke point. Such a move, many worry, could send oil prices and global inflation soaring and shake financial markets, including bitcoin.
However, these concerns may be overblown, according to some observers.
Early Saturday, Israel and the United States launched airstrikes on Iran aimed at dismantling the country’s nuclear facilities and missile capabilities after failed negotiations. Iran retaliated by firing ballistic missiles at Israel and US bases in the region, raising fears of an all-out military conflict.
This triggered tremors in the crypto market, the only place where investors can express fear and risk, while traditional markets remain closed for the weekend.
Bitcoin the leading cryptocurrency by market cap, fell to $63,000 from around $65,600 before rising to $65,000. Oil-linked futures on Hyperliquid rose more than 5%.
Hormuz fears
The Strait of Hormuz is a choke point (21 miles wide at its narrowest point) between Iran to the north and Oman to the south and facilitated about 20 million barrels of oil transport each day by 2024, according to the US Energy Information Administration (EIA).
Amid simmering tensions, crypto accounts on X are naturally concerned that Iran could close the Strait of Hormuz and choke off oil supplies.
“If a direct conflict between the US and Iran has begun, this is not just geopolitics. It is a global economic event. If the Strait of Hormuz is threatened, oil could rise towards $120-$150,” said an X-handle called @Crypto_Diet.
This could lead to an inflationary shock, market sell-off, a dollar appreciation and depreciation in emerging market currencies, the post added.
Several more accounts have published similar views, with some savvy geopolitical experts sharing these concerns.
“Oil prices had already risen to six-month highs ahead of the strikes. Iran is a founding OPEC member and the Strait of Hormuz, through which about 20% of global oil passes, is now directly implicated,” geopolitical strategist Velina Tchakarova said.
On top of that, some news outlets are already reporting that several major oil companies, including trading houses, have suspended oil and fuel shipments through the strait.
Complete closure unlikely
However, some observers argued that an outright closure of the strait is not in Iran’s best interest and may be geographically impossible.
According to Daniel Lacalle, PhD economist, fund manager and chief economist at Tressis, Iran currently produces 3.3 million barrels of oil per day, but exports only half of that, which goes almost exclusively to its ally China.
“It would shoot itself in the foot,” Lacalle said, downplaying fears of an eventual Iranian closure of the strait.
He added that OPEC members could quickly offset any potential disruption of oil supplies from Iran, while stressing that the United States itself is the world’s largest oil producer.
In other words, any rise in oil prices can be measured and be temporary.
The other aspect to consider is geography. While the strait is roughly split down the middle between Iran and Oman, the sailing routes are predominantly in Omani waters. This is because the water on the Iranian side is said to be shallower, while on the Omani side it is deeper and better suited for the movement of large oil tankers.
So, technically, ships can pass through Oman’s shipyard, meaning that Iran’s closure of its territory may not have a major impact on supplies.
“Most waterways are in Oman, not Iran,” said energy market expert Dr. Anas Alhajji the X.
“The Strait of Hormuz has never been blocked despite all the wars – it cannot be blocked. Too wide. Well protected,” he added.
All things considered, the chances of Iran closing the strait and suffocating oil supplies are low. That said, an all-out war could still trigger widespread risk aversion, potentially driving bitcoin below the much-watched $60,000 support level.
Meanwhile, bitcoin’s price chart also signals a potential for bear market deepening ahead amid the Middle East crisis.
