Concerns about the world economy have intensified as oil prices have surged past $100 a barrel following the US‑Israel clash with Iran.
Economists warn that a growing chance of an extended war in the key energy‑exporting zone could severely affect living standards globally, reviving fears of a fresh inflation shock.
In a climate of great uncertainty, stock markets are under strong selling pressure, consumers confront climbing costs, central banks may have to raise borrowing rates, and governments will face demands to aid households and firms.
How high could oil prices climb?
On Monday, oil traded above $119 a barrel, the strongest level since Russia’s full‑scale invasion of Ukraine in February 2022.
Analysts contend that the ongoing shutdown of the Strait of Hormuz could push prices toward $150 a barrel, surpassing the July 2008 record of $145.29.
The narrow channel along Iran’s southern coast moves roughly one‑fifth of the world’s seaborne crude and liquefied natural gas and about a third of the most common fertilizer.
Experts note that Iran’s de‑facto blockade has produced an impact 17 times greater than the April 2022 peak loss to Russian oil output after the Ukraine war, which had lifted oil to around $139 a barrel.
What follows depends on the duration of the strait’s effective closure and the capacity to reroute shipments.
Saudi Arabia has started sending crude to its Red Sea terminals, yet many exporters remain caught in bottlenecks.
Gulf oil and gas storage sites are nearing capacity, forcing the possible shutdown of large fields.
Restoring output to earlier levels would take time, deepening the energy squeeze.
Analysts suggest that a brief, intense clash that allows Hormuz shipments to resume would help temper energy prices.
Nevertheless, lingering doubts about the waterway’s safety could persist.
Capital Economics warns that a protracted conflict might keep oil above $100 a barrel for the remainder of the year.
How much could inflation be impacted?
The sharp rise in oil costs arrives at a fragile moment for the global economy.
Central banks had been approaching the end of a rate‑normalisation cycle after the most aggressive tightening in decades triggered by Russia’s invasion of Ukraine.
Further rate cuts had been expected, but specialists say the Iran confrontation could trigger the opposite—a renewed climb in borrowing costs.
The 2022 episode showed how higher energy prices and supply bottlenecks feed into consumer inflation.
Fuel costs for drivers are already climbing, household energy bills could jump sharply, and rising business expenses will echo through worldwide supply chains.
These pressures will ultimately be transferred to consumers.
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