Wall Street closes at a record for the first time since end of January
A peace deal in the Middle East is key to restoring global energy flows, and the sooner it could be achieved, the less negative economic impact it would have on the global economy, according to HSBC group chairman Brendan Nelson.
“The longer the disruption continues, the more the indirect effects from higher energy costs will lift inflation and depress growth,” Nelson said at the HSBC Global Investment Summit in Hong Kong, as carried by Reuters.
Inflation is accelerating due to the oil and energy shocks looming as a major risk to the economy, according to the executive.
Any current estimates of economic growth should be “approached with considerable caution”, Nelson added, citing uncertainties about the economic impact of the war and elevated energy prices.
So far the Iranian control of the Strait of Hormuz has removed about 10 million barrels per day (bpd) of crude oil supply to the global markets, analysts at ANZ have said. The U.S. blockade, if prolonged, could remove another up to 4 million bpd of supply, they added.
Without a reopening of the Strait of Hormuz, the shock to the global energy system will deepen and affect the global economy, analysts say.
Even if the Strait of Hormuz opened today without any restrictions and risks, oil and gas supply from the Middle East faces recovery of several months well into the late summer, according to Wood Mackenzie.
The longer the Strait of Hormuz crisis persists, the higher the impact would be.
The U.S. naval blockade that began on Monday changed the dynamics in the area.
“Maritime conditions in and around the Strait of Hormuz are shifting beyond controlled access toward active enforcement and rising confrontation risk,” maritime intelligence firm Windward said on Monday.
“The Strait of Hormuz is no longer operating solely as a controlled chokepoint. It is now a contested maritime space shaped by selective access, military positioning, and emerging enforcement actions.”