Iran’s Hormuz Vote: A Retaliatory Economic Weapon

The Iranian parliament’s recent vote to consider shutting down the Strait of Hormuz, a vital shipping channel responsible for a fifth of the world’s oil consumption, represents a significant retaliatory economic weapon against recent US actions. This move, if enacted, could trigger a severe oil supply shock, leading to soaring energy prices, heightened inflation, and a significant dampening of global economic growth. The International Monetary Fund’s chief, Kristalina Georgieva, has already warned that US strikes on Iran could severely impede global growth.
The immediate reaction in oil markets saw prices jump over 5% on Sunday to a five-month high of $81.40. While prices later retreated, with Brent crude falling to just over $76 a barrel on Monday, the underlying threat remains potent. Goldman Sachs has issued a sobering estimate that oil could reach $110 a barrel if Hormuz flows are halved for a month and then remain 10% lower for nearly a year, highlighting the extreme vulnerability of the global economy.
The gravity of the situation has prompted strong international responses. US Secretary of State Marco Rubio has emphatically stated that closing the strait would be “economic suicide” for Iran and has called upon China to exert its influence, given its substantial dependence on Hormuz for oil imports. This underscores the global economic interest in maintaining the free flow of commerce through the strategic waterway.
Meanwhile, financial analysts are urging caution. RBC Capital Markets has warned against assuming the crisis is over, citing a “clear and present risk of energy attacks” potentially carried out by Iranian-backed militias in Iraq. The reported U-turn of two supertankers in the strait further illustrates the immediate impact of the heightened tensions on maritime operations, keeping global stocks subdued.