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Closing The Strait Of Hormuz Will Be A Nightmare Scenario For The Global Economy
Our way of life depends on cheap energy. If you remove cheap energy from the equation, our society will be thrown into a state of chaos. The Iranians know that closing the Strait of Hormuz is one of the most powerful forms of leverage that they possess, because the world is deeply dependent on the oil that travels through that waterway. We don’t know exactly how this crisis will play out, because the Strait of Hormuz has never been closed in modern times. But as I pointed out earlier this month, we were warned that Israel would attack Iran, the global price of oil would rise, and the increase in the price of oil would be blamed on Israel. And that is precisely what has happened. Israel has attacked Iran, the global price of oil has been increasing, and many are blaming Israel for what has transpired. Unfortunately, the truth is that this crisis is just getting started.
On Sunday, it was being reported that the Iranian Parliament “has approved a measure to close the Strait of Hormuz”…
The Iranian Parliament has approved a measure to close the Strait of Hormuz, a critical global oil choke point, after the United States bombed three nuclear sites in Iran, according to Iranian state media on Sunday.
While the Parliament has voted in favor of closing the strait, the final decision rests with the country’s Supreme National Security Council, according to state media.
Of course the Iranian Parliament never would have held this vote if the Supreme National Security Council had not already decided what it was going to do.
At a time when the regime is under threat, there is no way that we are going to be shown any signs of disunity among Iranian leaders.
So what does this mean?
It means that the price of oil is going to go higher.
A lot higher.
JPMorgan is projecting that we could see the price of oil hit $130 a barrel in a “worst-case scenario”…
Investors predict a “knee-jerk” reaction, with oil prices expected to spike due to fears of disrupted Middle East supplies. Brent crude, already up 20% over the past month to $79.04, could climb toward $130 per barrel in a worst-case scenario, according to JPMorgan.
I agree that we could see the price of oil soon hit $130 a barrel.
But if the Strait of Hormuz stays closed for an extended period of time, it will go a lot higher than that.
In a previous article, I warned that if the price of oil rises above $100 a barrel and stays there, it will immediately push the global economy into a recession.
And I also warned that if the price of oil rises above $200 a barrel and stays there, it will immediately push the global economy into a depression.
Yes, we really are facing a worldwide economic depression if this crisis is not resolved.
Because of how narrow it is, the Iranians can shut down the Strait of Hormuz quite easily…
The strait connecting the Gulf of Oman with the Persian Gulf is one of the world’s most critical chokepoints — just 20 miles wide at its narrowest point.
Shipping lanes in the strait — the area that is deep enough for ships to pass — are even narrower at less than two miles wide in each direction, making them much more vulnerable to attacks and threats of closure.
The Iranians have been planning for such a scenario for many years, and they definitely have the resources to pull it off.
The reason why the Strait of Hormuz is so important is because approximately 20 percent of all global oil production travels through it…
About 20% of global oil and gas flow through the strait, which lies between Oman and Iran, and its closure could mean rising fuel prices for American consumers.
How will the world economy function when most oil exports from the Middle East are suddenly cut off?
That is a very good question.
It is being projected that economies in Asia will be hit the hardest…
The bulk of all oil exported by the regional petro giants, Iran, Iraq, Kuwait, Qatar, Saudi Arabia and the UAE, all travel through this narrow waterway.
Asia is likely to bear the brunt most from any closures to the waterway, with China, India, Japan and South Korea all getting most of their oil imports through the strait.
Thankfully, the U.S. has become a lot less dependent on foreign oil in recent years.
At this point we purchase “less than 3 percent of the oil coming out of the Persian Gulf”…
By contrast, the United States buys less than 3 percent of the oil coming out of the Persian Gulf, notably from northern Saudi Arabia. The United States became an overall net exporter of oil in 2020 as fracking technologies enabled a big increase in domestic oil production.
But ultimately everyone will be affected because oil is a global commodity.
It will be fascinating to see how this crisis plays out. Even before the Iranian Parliament voted, one oil tanker in the Strait of Hormuz suddenly reversed course once news broke that the U.S. had bombed Iran…
I don’t know if I even have the words to describe how serious this crisis could become.
U.S. Secretary of State Marco Rubio is urging China to convince Iran to keep the Strait of Hormuz open…
U.S. Secretary of State Marco Rubio on Sunday called for China to prevent Iran from closing the Strait of Hormuz, one of the most important trade routes for crude oil in the world.
“I encourage the Chinese government in Beijing to call them about that, because they heavily depend on the Straits of Hormuz for their oil,” Rubio said in an interview on Fox News. China is Iran’s most important oil customer and maintains friendly relations with the Islamic Republic.
And he is also warning that the U.S. military could get involved if the Iranians really do shut it down…
US Secretary of State Marco Rubio called it a “suicide mission,” adding it would be a massive escalation that would merit a response from the US and others.
He said: “If they do that, it will be another terrible mistake. It’s economic suicide for them if they do it.
“And we retain options to deal with that, but other countries should be looking at that as well. It would hurt other countries’ economies a lot worse than ours.”
Of course it would not be easy for the U.S. or any other major power to conduct an operation to reopen the Strait of Hormuz.
Any ships that enter the Strait of Hormuz would be sitting ducks for the Iranian missile launchers that have been dug deep into the cliffs that overlook the waterway.
Let me add another layer to all of this.
A tremendous amount of fertilizer also travels through the Strait of Hormuz, and that has very serious implications. The following comes from a Zero Hedge article entitled “Global Fertilizer Market Thrown In Chaos After Mideast War Shutters Iran Urea Production”…
“Iran was the third-largest urea exporter in 2024, according to StoneX, with export volumes of around 4.5 million tons – about the size of China’s. The country has a production capacity of around 8.9 million tons a year, Milam added, serving markets in Turkey, Brazil and Argentina, among others. It is also an exporter of ammonia.”
“In addition to knocking Iranian urea production offline, the attacks also brought Egypt’s operations to a standstill,” Ward reported. “Israel reduced its natural gas flows to the country on Friday, prompting Egypt to cease production.”
AgWeb’s Margy Eckelkamp reported that “Linville’s colleague at StoneX, Arlan Suderman, details why this conflict is being watched so carefully if the concern isn’t in those two countries’ production. ‘There’s a lot of other producers of fertilizer in the Middle East and a lot of it also passes through the Strait of Hormuz, which will be at risk going forward now,’ Suderman says. From a global supply standpoint, Suderman also points out the Ukrainian attack of one of Russia’s largest nitrogen fertilizer plants two weeks ago.”
Global fertilizer production was already being squeezed in a number of different ways even before Iran was attacked.
If fertilizer exports are not allowed to travel through the Strait of Hormuz, that could trigger famines in many areas of the planet.
Needless to say, famine is another one of the major themes that we have been anticipating.
We really are living in unprecedented times.
Now that missiles are flying and bombs are being dropped, there will be no going back to the way that things were.
Michael’s new book entitled “10 Prophetic Events That Are Coming Next” is available in paperback and for the Kindle on Amazon.com, and you can subscribe to his Substack newsletter at michaeltsnyder.substack.com.
About the Author: Michael Snyder’s new book entitled “10 Prophetic Events That Are Coming Next” is available in paperback and for the Kindle on Amazon.com. He has also written nine other books that are available on Amazon.com including “Chaos”, “End Times”, “7 Year Apocalypse”, “Lost Prophecies Of The Future Of America”, “The Beginning Of The End”, and “Living A Life That Really Matters”. When you purchase any of Michael’s books you help to support the work that he is doing. You can also get his articles by email as soon as he publishes them by subscribing to his Substack newsletter. Michael has published thousands of articles on The Economic Collapse Blog, End Of The American Dream and The Most Important News, and he always freely and happily allows others to republish those articles on their own websites. These are such troubled times, and people need hope. John 3:16 tells us about the hope that God has given us through Jesus Christ: “For God so loved the world, that he gave his only begotten Son, that whosoever believeth in him should not perish, but have everlasting life.” If you have not already done so, we strongly urge you to invite Jesus Christ to be your Lord and Savior today.
The post Closing The Strait Of Hormuz Will Be A Nightmare Scenario For The Global Economy appeared first on The Economic Collapse.
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