Iran's Strait of Hurmuz Oil and Gas Juggernaut Now in the Cross Hairs
The White House is holding high-level meetings today on the escalating tensions Fox has learned.
The
situation spotlights the battleground which is: the Straits of Hormuz. Over 30
percent of our daily supply of petroleum and liquified natural gas go through
the waterway. More than likely if a major conflict breaks out, the strait would
be ground zero for Iran and the world. Iran has many times threatened to close
this waterway and is uses it as its biggest threat against the U.S. and the
rest of the world.
The
downing of the drone pushed U.S. oil prices to the $56 per barrel level, while
Brent, the global benchmark, hit the $64 level.
There
is no doubt that if Iran did attempt and succeed in closing the waterway, it
would have a big impact on oil and the global economy. President Trump told Fox
News that if closed, it won’t be closed for long.
The
U.S. and other nations, of course, would attempt to not let that happen but
reopening the strait might be more difficult than one might think. Iran has
been preparing for this for decades and while the U.S. and our allies would
ultimately win the conflict and take control, it won’t be easy. Iran has spent
years building up militarily and preparing to try to close that strait and
while it may turn out to be their Waterloo before it gets reopened there could
be some significant disruptions to the global energy supply chain.
A
conflict with Iran may have more risk to Americans than just the price of oil.
The potential of a sharp rise in oil prices may create a shock to the economy
even against a backdrop of near-record U.S. oil production.
A sharp price increase due to a natural disaster or war is the type of price increase that can do real damage to the global economy. This is referred to as a price shock when businesses can’t react to the speed of the increasing prices. It is a situation where prices rise so fast that our economic engine can’t react quick enough and get frozen from doing more business. This type of event could take a major bite out of economic growth worldwide and in the past has even caused recessions. So the next couple of days are critical for all of us and our wallets.