Iran’s Hormuz Threat: A Test for Global Oil Markets

Iran’s recent parliamentary vote to potentially shut down the Strait of Hormuz, a key conduit for global oil shipments, is putting the resilience of international oil markets to the test. This retaliatory move, following a US attack, has ignited fears of a major oil supply disruption that could significantly elevate energy prices and impede global economic growth. The IMF chief, Kristalina Georgieva, has explicitly warned that US strikes on Iran could cause substantial damage to the global economy, with rising oil prices having broad-reaching repercussions.
Following the announcement, oil prices initially jumped by over 5% on Sunday, reaching a five-month high of $81.40 a barrel, reflecting immediate market anxiety. However, this surge proved short-lived, with Brent crude retreating to just over $76 a barrel on Monday. Yet, the possibility of extreme price hikes persists, with Goldman Sachs projecting oil could hit $110 a barrel if Hormuz flows are halved for a month and remain significantly lower for nearly a year.
The global community is keenly aware of the stakes. US Secretary of State Marco Rubio has forcefully stated that closing the strait would be “economic suicide” for Iran, urging China to leverage its considerable influence given its dependence on Hormuz for oil imports. This diplomatic pressure highlights the international desire to prevent any disruption to this vital waterway.
Meanwhile, financial analysts are urging caution. RBC Capital Markets has warned against assuming the crisis is over, citing a “clear and present risk of energy attacks” potentially carried out by Iranian-backed militias in Iraq. The reported U-turn of two supertankers in the strait further underscores the immediate impact of the heightened tensions on maritime operations, leading to subdued global stock markets.