Would Trump Risk an Oil Crisis?

"About a fifth of the world's oil passes through the strait every day, carried by ships bringing Middle Eastern output to the rest of the world, and virtually no alternatives exist for getting all of that oil to market. Several experts told me that if the strait were to remain closed for more than a few weeks, the price of oil could double or triple as countries and businesses engage in a bidding war to secure the limited supplies available from other sources."

"It's hard to overstate just how big of a deal this would be. It's the mother of all tail risks-the boogeyman that keeps oil traders up at night."

"Now that the strait has been closed, hundreds of tankers carrying millions of barrels of oil are sitting idly at the entrance, afraid to proceed further; oil supplies around the world are dwindling, and, with nowhere to send their product, major exporters are shutting down their oil fields."

Following strikes that killed Ayatollah Ali Khamenei, Iran threatened to attack ships crossing the Strait of Hormuz, a critical waterway through which approximately one-fifth of global oil supplies transit daily. This blockade represents a severe threat to the global energy system, with experts warning that prolonged closure could double or triple oil prices as countries compete for limited supplies. Hundreds of tankers now sit idle at the strait's entrance while major exporters shut down oil fields. Despite this potential catastrophe, oil markets have responded with relative restraint, with prices rising only about 20 percent. This muted reaction reflects widespread trader confidence that the United States will not allow such a disruptive situation to continue.

Read at The Atlantic