Strait of Hormuz Risk and Oil Market Volatility (2024)

Abstract

Strait of Hormuz is a world's watercourse, one of the main watercourses which provides links to various markets in Asia with some 20% of world's oil supply being transited through this watercourse. The way has raised concern around the world – and in the delicate politics of the Gulf area in 2024 amidst multiple conflicts. As the main objective of this study, it takes an overall view of the impacts of above mentioned risks on volatility of oil market globally. This paper seeks to explain the geopolitical reasons given for the perceived difficulties in transhipment in the waters, analyse how the threat affects the price of the oil and finally the effects on the overall market volatility and business activity. The method used in this work was pure qualitative and secondary data with collected from literature search the Academic journals, Government Publications, Industry Publications and analysed the previous few years (new) secondary data. In sailing, especially in the wake of the oil price swings, a lot of things can make a difference as is clearly shown through the results of this study, all the variables and disruptions due to geopolitical issues. The results indicate that minor events, which are increasing the risk of oil flows through the waterway, are capable of causing significant oil price surges and lengthy duration for prices to decline. Higher oil price volatility in turn is likely to make other markets more volatile and perhaps even a source of macro-economic and business issues like financial market volatility or inflation. Even after this research, it is clear that the strategic significance of the Strait of Hormuz for global energy security especially concerning oil resources will continue to be one of the basic grounds for increasing oil price volatility, hence necessitating an international cooperation and alternative routes for energy supplies to the ever growing and connected world's economy.