The escalating tensions between the US and Iran are having far-reaching impacts, from potential “energy attacks” near Basra in Iraq to urgent diplomatic calls to Beijing. Analysts at RBC Capital Markets warned of the risk of attacks from Iranian-backed militias, while US Secretary of State Marco Rubio pressed China to influence Tehran over the Strait of Hormuz. This demonstrates the global interconnectedness of the crisis. The IMF chief, Kristalina Georgieva, has already warned that US strikes on Iran could significantly damage global growth.
The primary concern remains Iran’s parliamentary vote to consider closing the Strait of Hormuz, a crucial waterway for a fifth of the world’s oil consumption. This retaliatory move against a US attack threatens to create an oil supply shock, leading to surging energy prices, increased inflation, and a likely deceleration of global economic activity, creating widespread ripple effects across all sectors.
Oil prices initially responded with a jump of over 5% on Sunday, reaching 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.
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 from oil producers to consumers worldwide. Global stocks remain subdued, reflecting continued uncertainty.