With the US-Iran war far from a quick resolve, the impact on the energy market goes beyond rising crude oil prices, that are expected to remain at a high of $95 a barrel, with a trickle-down effect on other markets and industries.
Veteran energy analyst Charles Ellinas said, in an interview with the Financial Mirror, that the closure of the Strait of Hormuz, the chokepoint for about 20% of world crude and natural gas supplies, has prompted Iran to mine the area, with a longer process needed to eventually clear the Persian Gulf of mines.
Furthermore, the impact is already being felt in related and parallel industries, such as shipping transport, petrochemicals and fertilisers, with an equal effect on food prices.
“The Iranians have started mining the Strait of Hormuz, which is quite a massive development in the sense that once mines are deployed, it then takes a lot of time to clear the Strait. It’s the duration of this conflict and even if President Trump decides next week to call an end to this, it may take more than two months before ships are able to go through the Strait,” said Ellinas.
“There is a major impact and the Energy Information Administration of the US ventured a forecast, saying that if this is going to last for a couple of months, they expect the Brent price to stay at about $95 a barrel and to come down to $70 only by the end of the year.
“You can imagine that if prices for the next two to three months stay at $95 and drop slowly to $70 by the end of the year it’s going to have a massive impact globally on the economy, on inflation, on the stock markets, on everything you can think of.”
Ellinas said that apart from the U.S. and Israel attacking Iran, both Iran and arch-rival Qatar do not intend to back down, no matter the financial cost.
He said that Qatar has one of the richest wealth funds in the world, so it can survive the war, while Tehran sees this as an existential war.
Apart from the direct impact on the economies of the other Gulf states, in the eastern Mediterranean, Syria and Lebanon are hurting from the war, while Egypt is suffering from high energy costs and lack of supplies of natural gas from Israel.
SEE FULL INTERVIEW HERE
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