The prospect of a shutdown or significant disruption in the Strait of Hormuz could send oil prices soaring to $110 a barrel, according to new estimates from investment bank Goldman Sachs. This stark forecast highlights the severe economic repercussions should Iran follow through on its parliamentary vote to potentially close the vital shipping channel in retaliation for a US attack. The International Monetary Fund’s chief, Kristalina Georgieva, has already warned that US strikes on Iran could inflict considerable damage on global growth.
The Strait of Hormuz is an indispensable artery for global energy, with a fifth of the world’s oil consumption passing through it. Any impediment to this flow would trigger an immediate oil supply shock, leading to surging energy prices, inflationary pressures, and a significant drag on global economic activity. While oil prices initially reacted strongly to the Iranian threat, jumping over 5% on Sunday, they later pared some gains, with Brent crude settling near $76 a barrel on Monday.
The international community is closely monitoring the situation. US Secretary of State Marco Rubio has strongly advised against closing the strait, labeling it “economic suicide” for Iran and urging China to intervene due to its heavy reliance on the waterway for its oil. This diplomatic pressure underscores the global economic stakes involved 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.
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