Iran’s plans to shut Strait of Hormuz threatens a ‘stagflationary shock’ akin to Russia’s Ukraine invasion

The Iranian parliament voted on Sunday to close the Hormemz Strait, a vital waterway for the global oil trade. The sudden vote and the ceasefire that follows, puts in a state of sharp comfort the global importance of the narrow strait between Iran and the Arabian Peninsula, which carries 20 % of global oil production.

The move, which was first reported by the state -run Iranian press, after the United States struck Iranian nuclear sites on Sunday and before Iran took revenge on the US military base in Qatar on Monday. While the oil markets fell 4 %, or $ 3 per barrel on Monday, analysts expected a sharp increase in prices if the country’s highest national security council agreed to close the strait.

Iran’s hypothetical plans to close the strait, although it is unlikely to actually occur even before the ceasefire declares, can have resounding effects on European and UK markets – and even a slight turbulence in the waterway can already shock the US economy to high inflation. Analysts say that modest increases in oil prices due to Iranian revenge in the region can have effects on how the federal reserve has been transferred to interest rate discounts in the remaining period of the year.

“[Closing the Strait of Hormuz] “” luck.

If Iran closes the waterway, Cruz expects that the shock in oil prices will increase the main inflation in the United States 1 %. The last “probably” scenario, as the strait does not close, but the 20 % increase in oil prices in the third quarter would increase the main inflation to increase half a percentage in the United States, 0.4 % in the eurozone, and 0.3 % in the United Kingdom, and the Cruz and the research team expected. This may compel the Federal Reserve to keep interest rates, a strategy they have used since December despite Trump’s pressure to cut prices.

Experts say that Iran may not have the ability to make backward copies of its threat, even if they moved to that.

“[Iran is] Paul Tess, an older colleague at the National Center for Energy Analysis, said, said, ” luck. “It is not clear if they have the ability to do this.”

In line with TICE thinking, Brent crude oil prices fell from $ 78.97 in Open, hovering about $ 70 on Monday afternoon, where traders see the continuous tanker flow on the Hormuz Strait. Trump appealed to the oil sector to keep the prices low today in a social publication, the readers warned: “I am watching! You are playing in the hands of the enemy. Don’t do that!”

But even increasing the disturbance of 20 % in oil prices can affect expectations from the central banks that are preparing for “an inflationary effect already accumulating the definitions”, Cruz warned.

“If you have an additional oil shock from oil prices, we will definitely not see the federal reserve reduction rates for the rest of the year,” Cruz said. “[Central banks] You need to make sure that this shock is already passing and will not make the same mistake they made in 2022: assuming that it will be a temporary effect on inflation. ”

Cruz said that the 20 % increase in oil prices will reach its peak in the third quarter of this year and disappear in the third quarter of 2026. The US Securities Market will decrease by 5 % to 10 % in this scenario, according to Panmure Liberum estimates.

Although the United States is confronting “a mixture of sticky inflation and height and [a] Ethan Harris, the former chief economist at Bank of America, said luck“I am more worried, frankly, about the trade war more than I am about the shock of oil prices.”

Harris holds the common opinion among economists that American consumers will start seeing the price of customs tariffs during the summer, and it is expected to start seeing the reports of the enlarged consumer price index in the coming months.

In his news on Monday, Harris wrote that people in U, BC. The economy is “more willing” to see oil price shocks as transitional. He added that the United States is less dependent on oil Imports were during the shocks of oil prices caused by flash points such as the United States of Iraq war in 1990 and are less dependent on oil in general as the country has become more orientation towards service.

As a result, most experimental works suggest $ 10/bbl [per barrel] Harris wrote: “The high price of oil reduces the gross domestic product by 0.1 % or less,” Harris wrote.

Goldman Sachs estimates the “geopolitical risk allowance” at a value of $ 12/barrel, defining the value as the increase in oil prices since its closure at $ 66.9 on June 10. On June 11, Trump said he was less confident in reaching a nuclear agreement with Iran.

In a report published on Sunday, analysts in Goldman said that the scenario that can be caused by nearly 20 million barrels of oil sizes that flow through the Strait of Hormuz by 50 % for one month, then remains 10 % for another 11 months, may cause Brent price $ 110/barrel. The risk premium for the barrel will rise to a little more than $ 25.

Although Harris says there is no “magic number” to predict a severe oil shock, the price of a barrel per barrel must reach “more than $ 100” to threaten the recession.

The exports of the Islamic Republic of Oil decreased from about 2.5 million barrels per day to only 150,000 barrels after the outbreak of the war with Israel, Israel Hayoum I mentioned.

Even if the strait is closed in the future, Macquarie Bank sees a solution.

The strategists wrote in a note: “No closure of the strait will not be completely overcome, because some oil loaded on the outskirts of the Gulf can be charged by land.” “But the risks associated with it are Iran’s attack on regional production sites for oil production.”

20 per cent of global oil production flows through the Strait of Hermoz, and experts say that the closure of the waterway will affect Iran’s economy significantly, because oil is one of the largest exports of the country.

“They will harm themselves,” said Tice of Ncea.