Statement from Minister Şimşek on the Strait of Hormuz

Treasury and Finance Minister Mehmet Şimşek shared a post on his social media account regarding the developments in the Middle East.

Şimşek, who said that they analyzed the effects of increasing geopolitical tensions on the economy in multiple dimensions and evaluated possible scenarios in detail, shared the following:

"Please do not believe in the speculations made about our economy based on scenarios in case the Strait of Hormuz is closed. With our program, we have significantly increased the resistance of our economy against shocks. We are determined to fight inflation and will continue to take all necessary steps to ensure disinflation continues."

WHY IS THE STRAIT OF HURMUZ IMPORTANT TO GLOBAL TRADE?

Iran's parliament has approved a bill to close a vital global trade route through which more than a fifth of the world's oil supplies pass daily, but the final decision will be left to Iran's top leaders.

WHAT IS THE STRAIT OF HURMUZ?

The Strait of Hormuz, one of the world's most important oil passages, has geostrategic importance for the United States and other countries as the power of the global economy depends largely on the flow of oil.

The strait is located between Oman and Iran and connects the Gulf in the north to the Gulf of Oman in the south and the Arabian Sea beyond.

At its narrowest point it is 33 kilometres wide, while the shipping lane is only 3 kilometres wide.

SO WHY IS IT SO IMPORTANT?

About a fifth of the world’s total oil consumption passes through the strait. Between the beginning of 2022 and last month, an estimated 17.8 million and 20.8 million barrels of crude, condensate and fuel flowed through the strait daily, according to data from analytics firm Vortexa.

Organization of the Petroleum Exporting Countries (OPEC) members Saudi Arabia, Iran, the United Arab Emirates, Kuwait and Iraq export most of their crude oil through the Bosphorus, mostly to Asia.

The U.S. Fifth Fleet, based in Bahrain, is tasked with protecting commercial shipping in the region.

WHAT HAPPENS IF IT IS CLOSED?

Closing the strait has the advantage of imposing a direct cost on Trump, as it would lead to an immediate inflationary oil price increase in the US and around the world.

But it would also be an act of dramatic economic self-harm. Iranian oil uses the same passage, and closing Hormuz risks drawing Gulf Arab states, which have been highly critical of the Israeli offensive, into war to protect their own interests.

Closing the strait in particular would cause significant damage to China. The world’s second-largest economy buys almost 90% of Iran’s oil exports, which are subject to international sanctions.

US Secretary of State Marco Rubio told Fox News he wanted China to help prevent Iran from closing the strait: "I would encourage the Chinese government in Beijing to call China on this issue, because they are heavily dependent on the Strait of Hormuz for oil. If they do that, it would be another terrible mistake," he added. "If they do that, it would be economic suicide for them."

There are reports that some supertankers have made a U-turn in the strategic waterway following the US attacks.

WHAT DID IRAN SAY ABOUT THE STRAIT OF HORMUZ?

Iran's Press TV reported over the weekend that the Iranian parliament approved a decision to close the Strait of Hormuz, but the final decision will be up to Iran's top leaders.

On Sunday, Iranian Foreign Minister Seyyed Abbas Iraqchi said Trump's decision to bomb Iran "will have lasting consequences," hinting that it could be an open-ended retaliation.

In his first statement since the US joined Israel's war against his country, Iran's Supreme Leader Ayatollah Ali Khamenei said Israel had made a "big mistake" and "must be punished" but made no specific reference to the Strait of Hormuz.

Source: News Center