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by jcranmer 102 days ago
About 20% of the world's oil flows through the Strait of Hormuz, which is effectively closed right now. So far, the economy is coping by drawing down inventories elsewhere and praying that the strait reopens soon, but even then, crude oil futures are skyrocketing (up 50% in a week). If this lasts for a few months--and if a few oil tankers get blown up in the crossfire--this is going to be a repeat of the 1970's oil embargo. There is also the worry that the war is going to end up targeting and destroying a significant chunk of oil production facilities in the region, which will persist the energy crisis well beyond the end of active hostilities.

Combine that with the fact that the war is being led by a senile idiot who is unable to articulate a strategic purpose for the war in the first place and being prosecuted by someone who thinks that war crimes are aspirational, and you begin to understand that there is actually little prospect of this being resolved anytime soon.
4 comments
Ostrogoth 102 days ago
One potential knock-on impact of the strait being effectively closed, is that at some point the gulf states will be forced to shut-in production as local storage fills up and production can’t be exported. That combined with war damage to critical transport/export infrastructure will cause a lag where production can’t meet global demand even when the strait re-opens. Turning oil wells back on is not like flipping on a light switch.
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velik_m 102 days ago
It's already happening: https://finance.yahoo.com/news/kuwait-cuts-oil-refining-outp...
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toast0 102 days ago
Ignoring concerns about the wisdom of the war; there's about three directions this can go:

Fizzle out: Strait reopens cause Iran needs ocean shipping.

Continue as now: oil trade disrupted, but using lots of missiles and drones and things; increased munitions demand leads to increased manufacturing jobs.

Boots on the ground: oil trade reopened, long term quagmire, probably more munitions production.

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nradov 102 days ago
The other Gulf States will now have to greatly increase military spending in order to protect their sea lines of communication against Iranian aggression. A lot of that spending will flow to US defense contractors. (I'm not claiming this is a good thing, just that it's inevitable.)
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shimman 102 days ago
Not just oil but a lot of fertilizers goes through the strait as well, fertilizers that have to be applied at certain moments of the year. Missing a shipment by a few months will decimate crop yields across the world.

If you think food is expensive now, wait until fall!

Unrelated, Grapes of Wraith is a good read if you're looking for something to distract yourself with.

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