Global economists warn of an economic crisis surpassing the COVID-19 pandemic, potentially unfolding in weeks due to the Iran conflict disrupting oil and gas supplies. The standoff endangers food security, air travel, and triggers widespread panic-buying as nations scramble for dwindling fuel reserves.
Threat to Vital Energy Routes
The Strait of Hormuz, through which one-fifth of the world’s oil and gas flows daily, sits at the heart of the turmoil. Bank of America predicts European gas prices could rocket from €29 to €500 per unit this winter if the strait remains closed, dwarfing post-Ukraine invasion peaks and sparking an energy emergency across Europe, the UK, and Asia.
Industries face shutdowns as energy costs soar, with recent strikes damaging key infrastructure in Iran and Qatar. These facilities supply a massive portion of global gas, and repairs may take months or years, tightening supplies further.
Expert Warnings of Rationing and Disruptions
Kurt Barrow, vice president of oil at S&P Global Energy, cautions that prolonged closure of the strait for two months would halt feedstock to plants, leading to genuine rationing, panic-buying, and hoarding.
Jeff Currie, energy expert at the Carlyle Group, highlights severe ripple effects. “We may need to ground planes, shut chemical plants, and accept lower crop yields,” he states. Oil and gas shortages threaten transport, manufacturing, and agriculture worldwide.
Market Panic and Surging Prices
Oil markets signal distress, with millions of barrels daily sidelined by infrastructure damage and transport issues. Dubai basket and Oman’s Murban crude fetch nearly $170 per barrel as Asian refiners compete fiercely. Jet fuel reaches $210 in Rotterdam and $240 in Singapore.
Escalation Risks in Key Chokepoints
Concerns mount over conflict spreading to the Red Sea. Helima Croft, former CIA analyst at RBC Capital, notes, “We continue to watch for any signs that the Houthis may enter the conflict and imperil the Red Sea.” She adds that even a few missiles or drones in the Bab el-Mandeb Strait could drive oil prices sharply higher, intensifying the crisis.
