US Secretary of State Marco Rubio has called on China to exert its influence over Tehran, emphasizing that closing the Strait of Hormuz would be “economic suicide” for Iran, especially given China’s heavy reliance on the waterway for its oil imports. This diplomatic appeal underscores the international concern over Iran’s recent parliamentary vote to potentially shut down the vital shipping channel in retaliation for a US attack. The IMF chief, Kristalina Georgieva, has warned that US strikes on Iran could severely damage global growth, primarily through their impact on oil prices.
The Strait of Hormuz is a crucial passage for a fifth of the world’s oil consumption, making any disruption a significant threat to global energy security and economic stability. A closure would undoubtedly lead to an oil supply shock, driving up energy prices, contributing to inflation, and impeding global economic growth. The gravity of this scenario is prompting urgent international dialogue.
Oil markets initially reacted with a jump of over 5% on Sunday, pushing prices to a five-month high of $81.40. However, prices later retreated, with Brent crude falling back 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.
Adding to the complexity, analysts at RBC Capital Markets have cautioned against underestimating the risks, citing a “clear and present risk of energy attacks” from Iranian-backed militias in Iraq. They emphasize that the situation remains highly fluid, a sentiment reinforced by the reported U-turn of two supertankers in the strait over the weekend, illustrating the immediate impact on global shipping.