Why the Middle East crisis is heading towards a long, messy muddle
The ongoing US-Iran tensions may impact oil prices and global growth, but a complete closure of the Strait of Hormuz seems unlikely. Discover more insights.
The ongoing crisis in the Middle East, particularly concerning the US-Iran relationship, is steering towards prolonged instability. The closure of the Strait of Hormuz has raised significant concerns about oil prices and global economic growth.
Current forecasts suggest a long-term reduction in shipping traffic through the Strait, with oil prices expected to average above per barrel. In scenarios of sustained disruption, prices could rise to approximately 0 per barrel, potentially slowing world GDP growth to below 2% next year. The oil market is now better equipped to absorb supply shocks due to a structural surplus and weakened demand growth.
Despite the challenges, both the US and Iran are unlikely to fully close the Strait, as it would not serve their interests. The situation may lead to intermittent escalations in tensions, but a complete breakdown seems less probable.
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