- Strait of Hormuz Threat Raises Global Supply Fears.
- Red Sea Tensions Disrupt Trade, Oil Prices Surge.
- Israel-Iran Clash Sparks Fears of Regional War.
Israel’s recent strike on Iran has significantly escalated an already tense regional standoff, raising concerns about a broader conflict in the Middle East. This sudden spike in tensions has shaken global markets and brought the possibility of serious economic repercussions to the forefront, reports Business Today.
Immediate Market Reactions
The financial markets reacted almost instantly. Brent crude oil prices jumped over 10%, reaching their highest point since January, while gold prices surged and the U.S. dollar strengthened as investors sought refuge in safer assets.
Strategic Chokepoints Under Threat
At the centre of this chaos is the Strait of Hormuz, a crucial oil transit route that carries nearly 20% of the world’s crude oil. If Iran were to block this passage, it would send shockwaves through global energy markets. Adding to the concern is the situation in the Red Sea, where Houthi attacks on commercial shipping have already caused significant disruptions since late 2023.
Red Sea Disruptions and Global Shipping
With container traffic in the Red Sea plummeting by 75%, many shipping companies have opted to reroute their vessels around the Cape of Good Hope, which adds an extra 10 to 14 days to delivery times and drives up logistics costs. Although the Houthis had temporarily halted attacks on ships not linked to Israel in early 2025, this fragile ceasefire is now on shaky ground as regional tensions flare up again.
Russia’s Unexpected Advantage
As the oil supply routes in the Middle East face potential shutdowns, an unexpected winner could be Russia. Already selling oil at discounted rates due to Western sanctions, Moscow might see a surge in demand for its crude if global supplies become constrained. Analysts believe this crisis could be the boost Russia needs to lift Ural crude prices, which have dropped 14% year-on-year through May and recently hit a two-year low.
Sanctions vs. Opportunity
Even with a staggering $150 billion hit from Western sanctions and a $60-per-barrel price cap imposed by the G7, Russia’s oil sector has shown remarkable resilience. A surge in prices driven by conflict could significantly boost Moscow’s revenue, especially as the EU prepares for its 18th round of sanctions and the G7 considers lowering the price cap to $45.
Lessons from Past Oil Shocks
This isn’t the first time that turmoil in the Middle East has rattled global energy markets. Last October, Iran’s missile strikes on Israel caused oil prices to jump nearly $10 per barrel. At that moment, experts cautioned that a broader conflict could unfairly favour Russia — a situation that seems to be unfolding now.
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Source: Business Today
