Source: Fortune
Summary
Renewed conflict in Iran and attacks on oil tankers in the Strait of Hormuz have sparked concerns of a global economic crisis. The strait is a critical passage for oil and liquefied natural gas, with around 20% of the world’s liquid petroleum passing through it. Experts warn that even a partial or prolonged disruption of petroleum supply could shock the world economy into contraction. Oil prices have already skyrocketed, with Brent crude jumping 13% to $86 a barrel. Analysts warn that attacks on energy infrastructure in the Gulf or an extended closure could bring prices to $100 or higher.
Our Reading
The numbers tell one story. The Strait of Hormuz, a key maritime traffic route, is a strategic chokepoint in the global energy system. The Islamic Republic has yet to forcefully close the strait, but the sentiment has already done quite a bit of legwork. Ship traffic through the strait was down 70% compared to the day prior, and oil prices have skyrocketed. Bob McNally, founder of consultancy group Rapidan Energy, warned that a prolonged closure of the Strait of Hormuz is a guaranteed global recession.
The global fallout would be significant. A prolonged pause to shipments would shock the global economy, with Europe, China, India, and Japan hit the hardest in terms of lost imports. The Oxford Institute for Energy Studies modeled the impact of a potential closure lasting more than a year, finding that 15% of global liquefied natural gas supply would be wiped out.
Original observation: The Strait of Hormuz is not just a critical passage for oil and gas, but also a pressure point in the global economy.
Author: Evan Null
