Fears over Strait of Hormuz closure cool after ceasefire announcement

By Edward Carron

June 25 - (The Insurer) - Fears that Iran could close the Strait of Hormuz after U.S. strikes on its nuclear facilities have cooled in the wake of U.S. President Donald Trump's announcement of a ceasefire.

The odds on prediction platform Polymarket of Iran closing the strait were down to 17% on Tuesday after peaking at 60% on Monday.

Polymarket is an online predictions platform where users can bet on the outcome of real-world events, such as elections, economic indicators or, as in this instance, geopolitical manoeuvres. More than $3.6 billion was traded on the platform on the outcome of the 2024 U.S. presidential election, according to the company.

Polymarket's odds on Iran closing the Strait of Hormuz were quoted in an analyst note from Goldman Sachs that was released on Monday.

Concerns were raised that the narrow channel of water between Iran and the UAE could be closed or that shipping could be disrupted in other ways after the U.S. bombed nuclear sites in Iran at the weekend. War-risk rates in the Gulf jumped on Monday in response.

The strait is one of the world’s most important shipping lanes with roughly 20% of global oil and gas passing through it.

The Lloyd's Market Association's head of marine and aviation, Neil Roberts, said that even after the U.S. strikes, "Iranian self-interests are thought by most to limit what they could/will do in Hormuz as so many countries rely on the straits".

Data from an International Energy Agency report on the Strait of Hormuz from 2023 showed that 9% of the 20 million barrels a day of crude oil and refined petroleum products that flowed through the shipping lane originated from Iran.

Iran produced 2.55 million barrels a day of crude oil in 2023, roughly half of which was shipped through the strait, according to the IEA.

The IEA report also showed that 80% of the petroleum products that passed through the strait went to Asia, with 25% to China and 14% to India.

Only 3% went to the Americas and 8% to Europe, representing less 5% and 10% of total imports to the regions, respectively. The study did not specify how much to the U.S.