Global economic anxiety is intensifying, largely driven by the potential “bottleneck effect” of the Strait of Hormuz, a critical shipping channel for a fifth of the world’s oil. The Iranian parliament’s vote to consider closing this vital waterway in retaliation for a US attack has sent shockwaves through international markets, raising fears of a severe oil supply shock that could trigger widespread economic damage. The International Monetary Fund’s chief, Kristalina Georgieva, has explicitly warned that US strikes on Iran could significantly impede global growth.
Oil prices initially surged over 5% on Sunday, hitting a five-month high of $81.40, demonstrating the immediate market reaction to the threat. While prices later retreated to just over $76 a barrel on Monday, the underlying risk remains potent. Goldman Sachs’s projection of $110 oil if Hormuz flows are significantly curtailed for an extended period highlights the potential for catastrophic economic consequences.
Diplomatic efforts are underway to mitigate the crisis. US Secretary of State Marco Rubio has forcefully 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 underscores the global interest in maintaining stability in the region.
Analysts are also advising caution, with RBC Capital Markets warning of a “clear and present risk of energy attacks” potentially orchestrated by Iranian-backed militias in Iraq. The reported U-turn of two supertankers in the strait over the weekend further illustrates the immediate impact of heightened tensions on maritime traffic, contributing to subdued global stock markets.