How high could oil go, and what might the global economic fallout be?

"Oil prices passed $119 a barrel on Monday, the highest level since Russia's full-scale invasion of Ukraine in February 2022. Analysts say the continued closure of the strait of Hormuz could drive the price close to $150 a barrel, above the record high of $145.29 set in July 2008. The narrow shipping route on Iran's southern border carries a fifth of global seaborne crude oil and liquified natural gas, and a third of the most widely used fertiliser."

"Goldman Sachs has said Iran's effective blockade of the waterway has had an impact 17 times larger than the peak April 2022 hit to Russian oil production after the Ukraine invasion, which pushed the oil price to about $139 a barrel."

"Economists say the increasing likelihood of a prolonged conflict in the vital energy exporting region could have serious consequences for living standards around the world amid the threat of a renewed inflation shock. Against a highly uncertain backdrop, financial markets are under heavy selling pressure, consumers are facing rising prices, central banks could be forced to increase borrowing costs and governments will come under pressure to support households and businesses."

Oil prices have exceeded $119 per barrel, the highest since Russia's Ukraine invasion, driven by US-Israel tensions with Iran. The potential closure of the Strait of Hormuz, which carries one-fifth of global seaborne crude oil and one-third of widely-used fertilizer, could push prices toward $150 per barrel. Goldman Sachs estimates Iran's blockade impact is 17 times larger than Russia's 2022 production disruption. Global consequences include financial market selling pressure, rising consumer prices, potential central bank rate increases, and government pressure to support households and businesses. Saudi Arabia is rerouting crude to Red Sea ports, but most exporters face bottlenecks. Gulf storage facilities are reaching capacity limits, potentially requiring oilfield shutdowns. Resolution depends on conflict duration and export diversion capabilities.

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