In response to the Israeli attacks on Iran that began on June 14, followed by U.S. strikes starting on June 22, the Iranian parliament has approved the closure of the Strait of Hormuz. The final decision still needs to be approved by Iran’s Supreme National Security Council. In the meantime, various former and current officials in Iran, for example, former Economy Minister Ehsan Khandouzi, who has ties to the IRGC (Islamic Revolutionary Guard Corps), have stated that Tehran must drastically change its approach to one of the world’s most strategically important maritime routes – the Strait of Hormuz.
In case of a possible closure of the Strait of Hormuz, the South Caucasus and Armenia in particular will not remain unaffected. Below, we attempt to assess possible developments in the fields of energy, trade, economics, and security, as well as consider what steps the Republic of Armenia could take to navigate the challenges and protect its strategic interests.
Source: The New York Times
Potential Economic and Political Consequences
The Strait of Hormuz is a globally significant strategic corridor that connects the Persian Gulf to the Gulf of Oman. It serves as the main route for transporting oil, liquefied natural gas (LNG), and other goods from the Persian Gulf countries to international markets. Roughly 20% of the world’s oil supply passes through this waterway, along with a substantial volume of general commercial cargo, including industrial and consumer goods. Any disruption to security around the Strait or a full-scale blockade could have serious consequences not only for global energy markets but also for international trade flows, sparking economic and political uncertainty both in the region and worldwide. The South Caucasus would not be immune to such impacts.
The Strait of Hormuz plays a central role in Iran’s national security strategy, where it is seen as a key geo-economic lever. The idea of asserting control over the Strait has repeatedly been floated as a countermeasure in response to external pressure. Over the years, Iran has regularly issued threats to close the Strait during periods of heightened regional tension, though it has never gone so far as to fully implement such a move -largely due to the risks involved. While Iran has not yet made a final decision on closure, the current developments and rising threats suggest that such a step could be considered a possible strategic response, driven by a growing perception of existential risk.
Under the provisions of the United Nations Convention on the Law of the Sea (UNCLOS), foreign vessels must be allowed to pass through international straits freely and without obstruction, with no unilateral restrictions imposed. In this context, any attempt by Iran to assert unilateral control over the Strait of Hormuz, even under the pretext of national security, would constitute a serious violation of the principle of freedom of navigation. It’s also worth noting that since 2023, citing security concerns, Iran has required all military vessels passing through the Strait to provide advance notification in Farsi, disclosing details about their nationality, type of cargo, and destination. This requirement directly contradicts internationally accepted norms governing the freedom of maritime navigation.
In this case, Iran’s closure of the Strait would likely be viewed by the multinational naval missions operating in the Persian Gulf, including the US- and French-led International Maritime Security Construct (IMSC) and the European Maritime Awareness Mission in the Strait of Hormuz (EMASoH), as not only a violation of international law, but also as an act of force, increasing the risk of regional military escalation.
Economic consequences and risks for the South Caucasus
Rising tensions around the Strait of Hormuz could trigger far-reaching global economic consequences. The global oil market has historically been highly sensitive to threats emerging from the Persian Gulf, and even the anticipation of instability often leads to sharp price increases. In fact, the war that began in June 2025 has already pushed oil prices upward. The surge in energy prices translates into higher government spending, such as increased subsidies, as well as an increase in the cost of imported goods, since their production and transportation processes are largely dependent on fuel. These developments, in turn, drive consumer inflation, as the prices of goods and services in the market rise in response to the price pressures mentioned above.
Armenia, lacking large-scale strategic reserves and being regionally dependent for supplies, is particularly vulnerable to both potential disruptions in the delivery of goods and sudden increases in logistics and insurance costs along supply routes.
The most efficient and commonly used trade route for imports from the Persian Gulf to Armenia runs through Iran (via the Norduz–Meghri border crossing). However, the closure of the Strait and potential internal instability in Iran could compromise the reliability of this route, exposing it to logistical and border-related risks.
Although in May 2024 Armenia announced its intention to launch a new trade route through the Iranian port of Chabahar in cooperation with India, and in 2025 an Armenian company reached an agreement to register within the port’s free trade zone and begin logistical operations, the route’s activation has been delayed and still lacks a clear timeline. The project envisions the formation of a logistics chain that would move goods from the Port of Mumbai to Chabahar and then overland through Iran to Armenia.
In light of these challenges, Armenia may have to explore alternative routes, such as corridors connecting China to the South Caucasus and the Black Sea via Central Asia and the Caspian Sea, reaching Georgia and then Armenia. However, these longer and more complex routes come with their own political and logistical risks. Diplomatic engagement with Georgia and Azerbaijan could help minimize these risks and improve route security, but expectations should remain measured – especially in the case of Azerbaijan, whose territorial ambitions toward Armenia significantly hinder the prospects of stable cooperation.
Given the importance of diversifying trade routes, it is necessary to reduce dependence on any single route.
Strategic and Security Threats for Armenia
Another likely consequence of the Strait of Hormuz’s closure could be that countries like Iraq, Azerbaijan, and Turkey seek to capitalize on the crisis by offering Europe alternative energy supply routes, undermining Iran’s economic standing. For Azerbaijan in particular, the situation presents a dual advantage: positioning itself as a viable alternative supplier and directly benefiting from the surge in global oil prices. For Armenia, however, this could translate into intensified pressure from the Turkish-Azerbaijani bloc, leveraging economic, regional, and energy dependencies as tools of influence.
Amid Iran’s increasingly hardline foreign policy stance and growing internal control, Armenia could face strategic repercussions. A potential military buildup not only in the Persian Gulf but also along Iran’s northern borders, may disrupt the practical level of cooperation between Tehran and Yerevan. The Armenia–Iran border, especially the Norduz crossing point, is of critical importance for Armenia’s economy and for maintaining external connectivity that bypasses regional blockades. If, under current wartime conditions, Iran begins to prioritize security over trade corridors, Armenia’s logistical and political position could become increasingly vulnerable.
Looking at the broader military picture: if Iran’s violations of maritime law (UNCLOS) escalate into a direct military confrontation with Western powers and Tehran is forced to concentrate its defensive efforts southward, this could destabilize Iran’s northern regions. Specifically, separatist movements among Iran’s Turkic-speaking population that already enjoys varying degrees of support from Turkey and Azerbaijan, may gain momentum, posing an additional and immediate security risk for Armenia.
Although Western actors may expect Armenia to align with sanctions or at least maintain diplomatic distance from Iran, such a course of action would carry significant risks for Yerevan. Isolating Iran is not a realistic option for Armenian foreign policy, given the lack of alternative energy and transit routes, as well as Iran’s strategic value as a counterweight in the regional security balance. This creates a difficult foreign policy dilemma: Armenia must preserve its essential ties with a regional partner while carefully avoiding entanglement in a broader strategic conflict.
Recommended Course of Action for Armenia
In response to the challenges that could arise from a potential closure of the Strait of Hormuz, it is in Armenia’s strategic interest to:
- Establish a data-driven rapid response unit involving the National Security Council, the Ministry of Foreign Affairs, and the Ministry of Finance.
- Avoid taking sides or issuing statements that directly criticize any party involved. At this stage, Armenia’s interests are best served by presenting itself as a rational actor committed to regional stability, rather than aligning with polarized blocs. By maintaining a neutral and predictable posture, Armenia can position itself as a constructive partner and potential channel for dialogue among key regional and global players (such as the EU, China, and India).
- Assess the potential impact of military movements in northern Iran on the security of the Armenia–Iran border.
- Develop contingency scenarios in case of a sudden escalation of instability inside Iran (e.g., mass unrest, risk of border closures).
- Review the volume of strategic reserves and update storage and supply systems for energy carriers, fuel, and essential goods.
- Explore prepayment mechanisms for energy futures contracts or consider issuing state guarantees to major importers to help prevent sharp inflation or shortages in the domestic market.
- Update emergency preparedness plans to account for disruptions in supply chains, prolonged increases in oil prices, and potential financial strain.
- Develop a structured public communication strategy to provide regular, transparent updates on the risks and on the government’s preparedness, thereby minimizing panic and the spread of misinformation.