A blockade of the Strait of Hormuz could cause global GDP to plummet by 2.9%
21 March 17:11
If the blockade of the Strait of Hormuz continues until the end of June, global economic growth in the second quarter will decline by 2.9 percentage points on an annualized basis, Bloomberg reported, citing estimates from the Federal Reserve Bank (FRB) of Dallas, according to [Komersant].
The strait has effectively been closed to international shipping since February 28—the start of the U.S. and Israel’s war against Iran. The price of a barrel of Texas WTI crude has already exceeded $97.
Researchers at the Dallas Fed modeled several scenarios depending on the duration of the blockade. If shipping resumes in one quarter, oil will drop to $68 per barrel, and GDP growth will increase by 2.2 percentage points. If the blockade lasts two quarters, the price of oil will rise to $115 in the third quarter, then drop to $76 by the end of the year. If the strait remains closed for three quarters, the price per barrel could reach $132 by the end of the year.
Not Just Rising Oil Prices
The economy is under pressure not only from rising oil prices but also from their impact on consumer demand, notes Bloomberg. Americans are already cutting back on spending in other categories due to rising fuel costs—reducing trips and lining up at gas stations to save a few cents. The average price of a gallon of diesel fuel in the U.S. has exceeded $5 for the first time in history, which is significant for the entire national economy, as diesel is used in virtually every industry.
Meanwhile, Iran’s “shadow fleet” continues to ship oil through the Strait of Hormuz, while shipping through it is effectively blocked for other countries. According to data from the vessel tracking services TankerTrackers and Kpler, Iran has exported approximately 1.1–1.5 million barrels of oil per day since the start of the war.
