Global financial markets are experiencing jitters, fueled by the intensifying Middle East security question and its potential to disrupt critical energy supplies. The threat of Iran closing the Strait of Hormuz, coupled with warnings of “energy attacks” from Iranian-backed militias, is creating widespread uncertainty. This volatility comes as the International Monetary Fund chief, Kristalina Georgieva, warns that US strikes on Iran could significantly damage global economic growth.
The Strait of Hormuz is a vital maritime artery through which a fifth of the world’s oil consumption flows. The Iranian parliament’s vote to consider shutting it down, in retaliation for a US attack, poses a severe threat of an oil supply shock, which would undoubtedly push up energy prices, exacerbate inflation, and impede global economic expansion.
Oil prices initially reacted with a jump of over 5% on Sunday, hitting a five-month high of $81.40. However, prices later retreated, with Brent crude falling nearly 1% to just over $76 a barrel on Monday. Despite this, the potential for dramatic increases remains, with Goldman Sachs estimating oil could hit $110 a barrel if Hormuz flows are substantially reduced for an extended period.
In diplomatic efforts, US Secretary of State Marco Rubio has called any closure of the strait “economic suicide” for Iran and has urged China to use its influence, given its heavy reliance on the waterway. The reported U-turn of two supertankers in the Strait of Hormuz further illustrates the immediate impact of heightened tensions on maritime operations, underscoring the ongoing volatility and the need for vigilance.
