Global stock markets remained subdued on Monday, reflecting widespread apprehension over the persistent tensions between the US and Iran and the potential for broader economic disruption. The UK’s FTSE 100 blue-chip index slipped 0.2%, while Asian markets showed a mixed performance. This cautious sentiment stems from warnings issued by the International Monetary Fund chief, Kristalina Georgieva, that US strikes on Iran could significantly harm global economic growth, largely through their impact on energy prices.
A central point of concern is the Iranian parliament’s recent vote to consider closing the Strait of Hormuz, a vital conduit for a fifth of the world’s oil consumption, in retaliation for a US attack. Such a move would create an immediate oil supply shock, leading to surging energy prices, increased inflation, and a likely deceleration of global economic activity, creating widespread ripple effects across all sectors.
Oil prices initially responded with a jump of over 5% on Sunday, reaching a five-month high of $81.40. However, prices later retreated, with Brent crude falling nearly 1% to just over $76 a barrel on Monday. Despite this, the potential for dramatic increases remains, with Goldman Sachs estimating oil could hit $110 a barrel if Hormuz flows are substantially reduced for an extended period.
In diplomatic efforts to de-escalate the situation, US Secretary of State Marco Rubio has called any closure of the strait “economic suicide” for Iran and has urged China to use its influence, given its heavy reliance on the waterway. Analysts at RBC Capital Markets are also advising caution, warning of “clear and present risk of energy attacks” from Iranian-backed militias and emphasizing that the situation remains fluid, as evidenced by two supertankers reportedly changing course in the strait.
