There are already serious economic consequences to the escalation in the Middle East. Crude oil prices have risen significantly in recent days, financial markets have been feeling the pinch, and the global economic outlook is deteriorating. According to Iranian sources, Israel has also attacked major oil and gas fields in the country, and experts do not rule out the possibility that Iran could respond by blocking one of the world's most important trade routes - the Strait of Hormuz, which is the only access to the Persian Gulf.
Iran has repeatedly threatened to block this important trade route in the past. What would be the consequences of a blockade for the global economy, the German economy, and consumers, explains the public media ARD in this regard.
Will oil supplies stop?
"The conflict in the Persian Gulf could disrupt traffic along one of the most important transport routes in the world and oil supplies from a region that provides about a quarter of global production," explains Ricardo Evangelista, chief analyst at brokerage company ActivTrades.
There are fears that the escalation could lead to an interruption in supplies of crude oil and natural gas from the main producing countries in the Persian Gulf, confirms Stephen Dover, head of the Franklin Templeton Institute. "Any action that impedes the transportation of oil through the strait would affect suppliers such as Saudi Arabia and other Gulf states, as well as oil importers, especially in Asia," the economist explains.
Iran exports oil mainly to China
Experts are less concerned about Iranian oil production, which is not crucial for the world market. The Islamic Republic produces about 3.8 million barrels per day, which corresponds to about 4% of world production, Dover notes. Of these, about 1.8 million barrels per day are exported, while the rest are consumed domestically.
Iran's main customers are mainly in Asia, the most important of which is China. "The global oil market could probably cope with the shortage for the time being", say experts from Metzler Bank, but oil is also exported from many other countries via this trade route: "Around 23% of global oil production, that is, a significant part of global exports of the raw material, comes from the Persian Gulf countries. And in the case of liquefied natural gas (LNG), this dependence is even more serious", warn analysts from Metzler. About a quarter of global supplies of liquefied natural gas pass through the Strait of Hormuz, adds ARD.
Uncertainty, but not panic
Despite the significant increase in prices, the oil and raw material markets are still relatively calm. Robert Halver, market strategist at Baader Bank, does not expect the Strait of Hormuz to be closed. If Iran nevertheless tries to block the trade route, this could lead to panic in the markets. Then, crude oil price forecasts will not only reach the $100 mark, but will also exceed it. Deutsche Bank expert George Saravelos predicted to ARD that the price of a barrel (159 liters) could rise even to over $120.
The entire global economy, which is still dependent on oil, will be affected by the increased energy prices. The increase in global inflationary pressures combined with the strengthening of recessionary trends will have an impact on the monetary policy of central banks.
Danger of stagflation
"Israel's attack on Iran increases the likelihood of global stagflation", warns Cyrus de la Rubia, chief economist at Hamburg Merchants Bank. As ARD recalls, stagflation is when prices rise and economic growth stagnates. Central banks then face a dilemma because they would have to lower interest rates to stimulate the economy, but this risks further price increases and a new suffocation of the economy.
Author: Thomas Spinler ARD