The United States has issued a stern warning to Iran, with Secretary of State Marco Rubio declaring that closing the Strait of Hormuz would be “economic suicide” for the Islamic Republic. This strong statement comes after the Iranian parliament voted to potentially shut down the vital shipping channel in retaliation for a US attack, raising fears of a major disruption to global oil supplies. The International Monetary Fund’s director, Kristalina Georgieva, has already voiced concerns that US strikes on Iran could significantly impede global economic growth.
The Strait of Hormuz is a critical artery for international oil trade, with roughly 20% of the world’s oil consumption passing through its waters. Any closure would inevitably lead to a severe oil supply shock, sending energy prices soaring, fueling inflation, and hindering global economic expansion. This immediate threat has put global markets on edge, despite oil prices falling back slightly after an initial jump on Sunday.
While oil initially surged over 5% to a five-month high of $81.40 a barrel, Brent crude later dropped nearly 1% to just over $76 a barrel on Monday. However, the potential for extreme price hikes remains, with Goldman Sachs estimating that oil could reach $110 a barrel if Hormuz flows are halved for a month and then remain significantly lower for nearly a year.
Adding to the uncertainty, analysts at RBC Capital Markets have cautioned against premature optimism, citing a “clear and present risk of energy attacks” from Iranian-backed militias in Iraq. They underscore that the situation remains highly volatile and unpredictable, a sentiment echoed by the reported U-turn of two supertankers in the strait over the weekend, signaling immediate operational impacts.