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Tankers in the Strait of Hormuz have ground to a halt, cutting off much of the world from vital oil supplies due to the United States’ war on Iran.
Dwindling supplies and cut output by oil producers are sending rippling effects across global markets. As S&P Global vice chair Daniel Yergin argued in a Financial Times essay, it’s looking like a “nightmare scenario” is now unfolding as skyrocketing oil prices “send the world economy plummeting into a deep recession” — a reckoning that’s been decades in the making.
The Strait of Hormuz has turned into a major chokepoint, with around 20 percent of the world’s liquefied natural gas and oil supply typically traveling through its waters.
Now that tankers aren’t taking the risk of being targeted by Iranian drones or weaponized speedboats, that crucial artery has been largely cut off. While Yergin argues Asia could be hit hardest sooner, global oil and gas markets across the world will be “grappling with the crisis.”
The price of crude oil soared past $100 a barrel over the weekend as production slowed significantly. Americans are already feeling the effects at the gas pump, with prices surging for both gasoline and diesel.
On Wall Street, grim effects are playing out, with Dow, S&P 500, and Nasdaq futures plummeting. Both the Dow Jones Industrial Average and S&P 500 slid by a percent or so when trading resumed Monday morning.
Put simply, investors are seriously on edge as they fear the worst: a prolonged war in Iran causing major oil shortages.
Worse yet, domestically, a “flashing red warning light” went off last week when the US Bureau of Labor Statistics issued its February jobs report, finding that the economy had shrunk by 92,000 jobs — far more than expected, raising the unemployment rate to 4.4 percent.
And impossible to ignore are existing fears and uncertainty over enormous investments in AI. Companies are spending hundreds of billions of dollars on enormous data centers across the country, unprecedented capital expenditures that are seemingly propping up a waning US economy — while also making investors nervous.
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