The Iranian parliament has taken a dramatic step by voting to consider shutting down the Strait of Hormuz, a move that directly threatens the global oil lifeline. This retaliatory action, in response to a US attack, holds the potential to trigger an unprecedented oil supply shock, which would send energy prices soaring, fuel inflation, and significantly impede global economic growth. The International Monetary Fund’s chief, Kristalina Georgieva, has warned that US strikes on Iran could severely damage the global economy.
Oil markets reacted with immediate concern, seeing prices jump over 5% on Sunday to a five-month high of $81.40. While prices later retreated, with Brent crude falling to just over $76 a barrel on Monday, the underlying threat remains potent. Goldman Sachs has issued a sobering estimate that oil could reach $110 a barrel if Hormuz flows are halved for a month and then remain 10% lower for nearly a year, underscoring the extreme vulnerability of the global economy.
The gravity of the situation has prompted strong international responses. US Secretary of State Marco Rubio has emphatically stated that closing the strait would be “economic suicide” for Iran and has called upon China to exert its influence, given its substantial dependence on Hormuz for oil imports. This highlights the global economic interest in maintaining the free flow of commerce through the strategic waterway.
Meanwhile, financial analysts are urging caution. RBC Capital Markets has warned against assuming the crisis is over, citing a “clear and present risk of energy attacks” potentially carried out by Iranian-backed militias in Iraq. The reported U-turn of two supertankers in the strait further illustrates the immediate impact of the heightened tensions on maritime operations, keeping global stocks subdued.
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