Just what the world needs, another Middle East conflict
The implications of a shooting war between Iran and the West don’t bear thinking about.
There are varying estimates of how much crude oil is shipped through the Straits of Hormuz, but the most consistent figure given is around 20 percent of the global supply.
That’s about 17 million barrels a day that the Iranians are threatening to choke off, which will tie a large granny knot in the vital oil supply line. It doesn’t take much to rattle the oil market and prices have already shot up, but if the narrow passage between Iran and Oman is blocked it will take the price per barrel and blast it into the stratosphere.
Just talking about it saw the price of 380 CST bunker fuel in Japan, South Korea and Hong Kong this week hit its highest levels since Q3 2008, while Shanghai prices rose to an all time high, according to Platts data.
Whether the Iranians are serious about trying to close the strait remains to be seen, but if they are, it will surely bring a swift response from a world growing weary of Tehran’s obtuseness.
However, it is an exceptionally dangerous time for Iran to be playing with fire. With the US in election mode, political considerations will come first if any military action has to be taken, which virtually guarantees that the wrong decision will be made.
If the shooting starts, from a shipping perspective, it would be a disaster. Dubai’s Jebel Ali is the biggest container port in the region, and in the world’s top 10, and a significant percentage of its throughput is destined for the Gulf states. Jebel Ali also serves as a transit point for cargo heading for the sub-continent and Africa as it focuses on growing its emerging market connections.
As a gateway for oil transport, the strait has a steady stream of tankers from Abu Dhabi, Bahrain, Qatar and Iraq passing through, plus bulk carriers with raw materials for infrastructure projects across the region. All that shipping would grind to a halt.
The only ones to benefit from Iran blocking the Straits of Hormuz will be OPEC fat cats who can then wedge their bloated posteriors into reinforced double-wide chairs, carefully lean back and watch the dinars piling up as the oil price doubles.
But can you imagine the impact that would have on the world’s shipping carriers and airlines. Fuel already makes up more than 50 percent of their operating costs, so to stay in business there would have to be some bunker adjustment factors or fuel surcharges at levels never seen before.
No, the West getting involved in another Middle East war is something everyone could do without.