Why The Iran War Is A Worst-Case Scenario For The Global Economy

The Iran war was already choking energy

and commodity markets.

But after attacks on oil and gas infrastructure last week,

market researchers say we're now facing

a worst-case scenario for the global economy.

Initial attacks on Iran by Israel and the US,

followed by retaliatory attacks by Iran

at targets across the Gulf,

effectively closed the Strait of Hormuz earlier this month.

This strait is one of the world's most important

shipping routes for oil and gas, as well as byproducts

like industrial chemicals and fertilizer.

That was enough to send oil prices above $100 a barrel

for the first time since Russia's full-scale invasion

of Ukraine in 2022, but oil production

and export facilities stayed mostly untouched.

Last week, however, Israel targeted

the South Pars gas field,

the world's biggest natural gas field.

Iran retaliated with counter strikes,

including on the world's largest

liquified natural gas export facility in Qatar.

The CEO of Qatar's state-owned oil and gas company

told Reuters that the strikes had taken out

17% of its capacity.

Even if the Strait of Hormuz reopened soon,

this damaged infrastructure could take years to rebuild.

If energy facilities keep on being targeted,

it's hard to overstate how devastating ripple effects

could be to the global economy.

In the US, consumers will soon see higher prices

at the gas pump, and pricier fuel for trucking

could mean higher prices on groceries too.

Inconsistent messaging from the White House isn't helping.

Trump said last week

that the US was not involved in Israel's decision

to strike the gas field and said it would not happen again.

But he also warned Iran

that if it struck production facilities again,

then the US would quote, Blow up South Pars.

On Monday, March 23rd, Trump said

that he was postponing strikes against Iranian power plants

and energy infrastructure for five days

due to positive talks over a ceasefire,

causing oil prices to dip, but Iranian state media denied

that any talks had taken place.