Middle Eastern military conflict escalates; if the Strait of Hormuz is blocked by Iran, it will impact the global economy.

The US and Israel launch military actions against Iran, and the global energy markets are closely watching the evolving Middle East situation. The Guardian reports that the escalation of conflict could disrupt the oil supply chain. Currently, many oil tankers are stranded at the entrance to the Persian Gulf. If the Strait of Hormuz is blocked by the Iranian Revolutionary Guard, it could lead to a sharp rise in international oil prices, impacting the global economy.

Stagnation in the Strait of Hormuz will trigger soaring oil and commodity prices

Within hours of the US and Israel’s airstrikes, Iran’s Revolutionary Guard warned that no ships are allowed to pass through the Strait of Hormuz, the world’s most important oil trade route. Iran has not officially confirmed a blockade, but if it does, it would create unprecedented tension in the Middle East. After an attack on ships near the Oman waters, ships seem to be avoiding the Strait of Hormuz. According to Reuters, at least 150 oil tankers carrying crude oil, liquefied natural gas, and petroleum products are anchored in open waters on the other side of the Gulf. If the blockade continues, up to 15 million barrels of oil per day could be unable to reach their destinations.

Experts say that in the worst-case scenario, oil prices could surge from about $67 to $100 per barrel, causing trouble for many developed countries, including the US, which are trying to escape the impacts of inflation on economic growth and productivity. The Iran-US conflict could lead households to face rising prices and inflation crises.

Iran’s oil production drives global living costs

Iran, as the world’s fourth-largest oil reserve holder, has about 170 billion barrels of crude oil, accounting for 9% of global reserves, and holds a key position within OPEC. Despite long-term international sanctions, Iran’s production has rebounded to about 3.5 million barrels per day through trade with China. Experts analyze that Iran’s influence is not only in its 3-4% share of global exports but also in its control of strategic areas and its ability to disrupt energy infrastructure. Rystad Energy states that Iran has means to interfere with regional security dynamics. Even if its own oil exports are affected, threatening the regime’s survival might make disrupting shipping lanes a last-resort retaliation.

Market analysis indicates that military actions have broken the previous stability where oil prices hovered around $67 per barrel. If the conflict does not quickly de-escalate, crude oil prices are expected to rapidly surpass $90 per barrel, with long-term disruptions possibly pushing prices above $100. For developed economies still recovering from inflation, rising energy costs will directly weaken productivity and trigger a cost-of-living crisis. Although OPEC and Russia have discussed increasing production to offset the impact of the conflict, geopolitical premiums remain difficult to eliminate. Analysts warn that while the US hopes to prevent escalation to stabilize the pre-election economy, damage to Iran’s oil supply chain will inevitably lead to a new wave of global price surges.

This article, “Middle East Military Tensions Escalate; If Iran Blocks the Strait of Hormuz, It Will Impact the Global Economy,” first appeared on Chain News ABMedia.