The Iran war is the latest threat to the global economy that has been downplayed by Trump

As the war between the United States and Israel on Iran unfolds in the coming days and weeks, the scale of the collapse of the world economy will be measured at the gas pump.

The main problem that conflict brings to the health of the country’s economy is in the rise in electricity prices.

Iran’s effective blockade of the Strait of Hormuz and Iran’s attacks on key energy production facilities in Qatar and Saudi Arabia have halted a large part of the world’s energy supply.

For the global economy that has already been shaken by the tariffs of the President of the United States, Mr. Donald Trump, and what many see as his release of the post-World War II agenda, much depends on how long the damage lasts.

A sharp rise in electricity prices would raise the price of everyday goods.

Central banks are likely to raise borrowing costs to curb inflation, reduce consumer spending and drag down economic growth.

“The real question is how long the disruption of the flow of the Strait of Hormuz will last and how much destruction there will be,” said Anne-Sophie Corbeau, a researcher at Columbia University’s Center on Global Energy Policy.

“At the moment, the market is selling short-term damage and there is no destruction. But it can change in the future. We don’t know now how this whole problem will end.”

While Iran’s threat to shipping has halted traffic through the Strait of Hormuz, the channel for one-fifth of the world’s oil, crude prices have seen modest gains so far.

Brent crude hit $84 a barrel on Friday morning, US time, up about 15 percent from pre-dawn prices.

That gain is small compared to the problems of the past.

During the 1973-74 oil embargo led by the Arab members of OPEC, prices quadrupled in just three months.

Since then, the country’s reliance on Middle Eastern oil has declined significantly.

Today, the US is the largest producer in the world, producing more than 13 billion dollars a day, more than Iran, Iraq and the UAE combined, according to the US Energy Information Administration.

But if supply disruptions extend beyond a few weeks, oil prices could rise sharply.

To maintain the capacity of obstacles

Seven Gulf oil-producing countries – Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the UAE – could run out of oil reserves in less than a month if the Strait of Hormuz remains closed, according to a study by JPMorgan Chase.

With most of the storage depleted, manufacturers would be forced to cut production.

“Although there will be some capacity elsewhere, and some options to use pipelines rather than shipping, it is very difficult to replace the total amount as we are talking about an average of 20 million barrels of oil per day that usually cross the Strait of Hormuz,” said Sarah Schiffling, an expert on supply chains at the Hanken School of Economics in Helsinki.

“This important maritime chokepoint provides great value to the world’s economy.”

This week, analysts at Goldman Sachs estimated that global oil prices could reach $100 a barrel – a threshold not seen since Russia’s invasion of Ukraine in 2022 – if shipping remained at reduced levels for five weeks.

In an interview published by The Financial Times on Friday, Qatar’s energy minister, Saad al-Kaabi, warned that producers in the region could stop production within days and that oil could rise to $150 per barrel.

Such an increase would feed back through the country’s economy.

The International Monetary Fund says that the growth of the world’s economy has decreased by 15 percent due to the increase in oil prices by 10 percent.

The pain would not be evenly distributed.

About 80 percent of the oil is transported by road to Asia.

India, Japan, South Korea and the Philippines, all of which depend on foreign energy imports, could be among the economies most at risk of rising prices for food and fuel.

“The trend is felt in Asia and Europe in particular,” said Lutz Kilian, an economist at the Federal Reserve Bank of Dallas.

“Some countries, like China, have large oil reserves to help the climate in the short term, but others don’t.”

Liquefied natural gas (LNG), which is also transported through the valley and has fewer exporters than crude oil, has already seen a rise in prices.

European LNG prices rose by as much as 50 percent on Monday after QatarEnergy, which transports a fifth of the world’s LNG by sea, announced a production freeze following the attack on Iran.

“Gas will be the most affected because the market was still tight and the stocks are low in Europe as we are coming to the end of the winter; again, there is no substitute for lost LNG,” said Corbeau.

Long uncertainty

With US President Donald Trump signaling that he intends to continue striking Iran for several more weeks, the extent to which Tehran is willing – or able – to keep the line closed will be critical to the country’s economy.

Nine commercial vessels have been targeted in attacks in or near the strait since the conflict began, prompting many insurance firms to withdraw coverage for ships in the Gulf.

While traffic through the drive hasn’t stopped, it’s down about 90 percent compared to normal levels, according to ship tracker MarineTraffic.

“The dishonesty itself is the most dangerous part. Retail chains hate dishonesty,” Schiffling said.

“It is possible to plan for anything, but not knowing what will happen makes it difficult to adjust operations.”

On Wednesday, Trump said he had ordered the US International Development Finance Corporation to start insuring shipping lines in the region to keep trade flowing.

Trump also said the US Navy could begin escorting ships through the line if necessary.

“As long as Israel and the US are able to suppress Iranian drone and missile attacks on the road to the point where most of the oil tankers can pass, and as long as the United States provides reimbursable insurance to the shippers and their goods, the world’s economy can make it through this war without slowing down,” said Kilian.

“On the other hand, if there is a severe disruption of the oil supply, the economic costs will grow and the disruption will take time.”