Donald Trump’s recent attack on Iran has ignited a flurry of economic warnings from international bodies and financial experts, signaling potential severe repercussions for global growth. The International Monetary Fund’s chief, Kristalina Georgieva, explicitly stated that US strikes on Iran could damage global growth, citing the risk of rising oil prices and their subsequent “secondary and tertiary impacts” on the world economy.
The immediate retaliatory threat from Iran is the parliamentary vote to consider closing the Strait of Hormuz, a crucial shipping channel for a fifth of the world’s oil consumption. Such a move would create an immediate oil supply shock, leading to surging energy prices, increased inflation, and a likely deceleration of global economic activity, creating widespread ripple effects across all sectors.
Oil prices initially responded with a jump of over 5% on Sunday, reaching a five-month high of $81.40. However, prices later retreated, with Brent crude falling nearly 1% to just over $76 a barrel on Monday. Despite this, the potential for dramatic increases remains, with Goldman Sachs estimating oil could hit $110 a barrel if Hormuz flows are substantially reduced for an extended period.
In diplomatic efforts, US Secretary of State Marco Rubio has called any closure of the strait “economic suicide” for Iran and has urged China to use its influence, given its heavy reliance on the waterway. Analysts at RBC Capital Markets are also advising caution, warning of “clear and present risk of energy attacks” from Iranian-backed militias and emphasizing that the situation remains fluid, as evidenced by two supertankers reportedly changing course in the strait.
