Analysis: Long-term Closure of the Strait of Hormuz Could Trigger Global Economic "Certainty Recession"

BlockBeats News, March 3rd, as tensions escalate in Iran and retaliatory actions in the Middle East, the Strait of Hormuz has once again become a global economic focal point. Analysts warn that even a partial or temporary disruption in oil supply could have a significant impact on the global economy; if the strait remains closed for an extended period, the global economy may face a "certainty recession."

Bob McNally, Founder of Rapidan Energy Group and former energy advisor to the Bush administration, stated: "A prolonged closure of the Hormuz Strait would lead the global economy into a certainty recession."

According to the U.S. Energy Information Administration, around 20% of global liquefied natural gas (LNG) trade needs to pass through this strait by 2024; approximately 38% of global oil supply also flows through this passage. In 2024, Saudi Arabia alone is expected to transport around 5.5 million barrels of oil per day through this route. Despite the presence of alternative pipelines across the Arabian Peninsula, the capacity is limited, making it challenging to compensate for a complete strait closure.

Even without Iran actually blocking the strait yet, market expectations have already been disrupted. Media reports indicate that the Iranian military has warned the area to be "unsafe," resulting in a 70% drop in ship traffic through the strait compared to the previous day.

Research institutions estimate that if the strait remains closed for over a year, approximately 15% of global LNG supply would vanish, with Europe, India, and Japan facing the most severe import impacts. Analysts believe that if Gulf energy infrastructure is attacked or passage restrictions are prolonged, oil prices could rise to over $100 per barrel. Some institutions assess a 20% probability of oil prices reaching $120.

However, analysts also point out that Iran faces practical constraints in implementing a long-term blockade, including the U.S. military presence in the region and the diplomatic consequences of cutting off the energy supply. Historically, Iran has threatened to close the strait multiple times but has not actually done so.

The energy consulting firm Wood Mackenzie highlighted that the global recession triggered by the oil crisis in the 1970s, but the current global economy's reliance on oil has significantly decreased. To replicate the scale of the impact seen in the past, oil prices may need to rise to around $200 per barrel. The firm believes that if the conflict continues to drive up oil and gas prices and impact vulnerable economies, the intense volatility in the global financial markets may compel relevant countries to seek a path to moderation.