Iran supplies about 2% of the world’s oil, but the real threat is a possible blockage of the Strait of Hormuz, through which about 20% of the world’s oil passes. While prices remain below last year’s levels thanks to increased production in the US and elsewhere, a possible regional war could lead to oil shortages, spurring inflation and affecting interest rates. Analysts suggest that oil prices would have to reach $90 a barrel to have a significant impact on central banks. On the geopolitical risk front, many companies are already taking steps to protect against a possible spike in oil prices, prompting investors to hedge their positions.
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The conflict could also spill over into the US election, which could have significant implications for trade relations and the economy. While markets often ignore geopolitical risks, the current situation calls into question how long this can continue. Thus, the presence of multiple factors related to the conflict in the Middle East continues to be monitored and promises an uncertain outlook for the global economy.
