What is the Strait of Hormuz and why is it so important for global shipping?

During the recent conflict between Iran and Israel, Iran threatened to block the Strait of Hormuz, one of the world’s major shipping routes.

Would that be possible, and what effects would it have?

The Strait of Hormuz is a choke point at the entrance to the Persian Gulf. It is used to transport about 20% of global daily oil consumption.

Iran effectively controls this crucial shipping route because it is a coastal state bordering this narrow stretch of water. The strait is too narrow to avoid navigating waters claimed by Iran. This raises thorny legal questions about whether it is really possible for Iran to block the strait, and what recourse other states have if it does.

This geographical reality is far from new, and the legal frameworks governing international maritime activity have developed over centuries. At its heart is the lex mercatoria — the “law of merchants” — a body of transnational commercial law that emerged organically from the practices of traders operating across borders.

Within this broader framework sits the lex maritima, or customary maritime law, which has long adapted to the hazards of shipping across vast oceans.

The lex maritima originated from the shared practices of seafarers and merchants. Its purpose? To manage the unpredictable nature of maritime trade that demands coherent and stable rules.

One of the most enduring principles of this legal tradition is the idea of mare liberum, or “the free sea”, set out by Dutch jurist Hugo Grotius in 1609. He argued the high seas should remain open to all for peaceful navigation and trade. This conveniently legitimised the ambitions of European colonial powers, granting them unfettered access to global maritime routes at a time when control over sea-based trade promised immense economic and strategic advantage.

The shifting boundaries of maritime law

One of the most fundamental questions in maritime law is: where do a nation’s territorial waters end, and the high seas begin?

After the second world war, a series of conferences culminated in the United Nations Convention on the Law of the Sea (UNCLOS), where the customary 3 nautical miles (5.56km) of territorial waters states could claim as their own was extended. This narrow limit was rooted more in historical naval range – the so-called “cannon shot rule” – than in modern geopolitical or environmental realities.

In 1959, Iran took the unusual step of unilaterally extending its territorial sea to 12 nautical miles, despite not being a party to UNCLOS. Two decades later, following the 1979 Iranian Revolution and the US Embassy hostage crisis, Washington grew increasingly anxious about the security of oil flows from the Persian Gulf. These concerns intensified during the Iran-Iraq War, especially as Iran began using small islands in the Strait of Hormuz to deploy military forces and threaten commercial shipping.

UNCLOS and the new rules of the sea

One of the key compromises of UNCLOS was an extension of territorial waters for states that ratified the treaty. In exchange, UNCLOS replaced the older concept of “innocent passage” – which allowed only surface navigation through territorial seas – with the broader notion of “transit passage”. Under this regime, vessels and aircraft from other states are granted the right to travel not only on the surface, but also under the sea and through the air above straits used for international navigation.

While 169 states have ratified UNCLOS, both Iran and the United States remain notable holdouts. This means Iran does not enjoy the broader 12-nautical-mile limit recognised under UNCLOS, and the US cannot claim the agreement’s protections for transit passage through strategic choke points.

While the geopolitical and legal tensions surrounding the Strait of Hormuz may seem far removed from the world of private commerce, the global economy continues to function thanks to a powerful legal tool: the contract. Contracts offer a predictable framework that allows trade across borders without parties needing to trust one another personally.

The Strait of Hormuz is bordered by active, assertive states such as Iran, which means the potential for interstate conflict is relatively high. This doesn’t mean commercial contracts are irrelevant to the recent dispute in the Strait of Hormuz — far from it. But their influence is more indirect.

What can be learned?

Without significant political change in Tehran, it’s unlikely either Iran or the US will shift its position on adopting UNCLOS. Yet despite Iran’s repeated threats to close the strait, it has never followed through — and the US Navy continues to maintain a steady presence in the region. For now, a fragile but persistent equilibrium holds.