President Donald Trump’s move to blockade the Strait of Hormuz risks deepening an unfolding economic crisis for Asia’s energy-dependent economies, including America’s allies in the region and China, as global oil prices rallied as much as 8.6% on Monday to more than $103 a barrel . “For the global economy and markets, the latest developments shift the focus back toward downside risks — pointing to higher oil prices and a larger blow to growth and boost to inflation,” Bloomberg Economics’ analysts including Jennifer Welch wrote in a note . European gas futures spiked almost 18% at one point, underscoring the ripple effects of the US blockade on global energy markets . The Strait of Hormuz is a critical chokepoint through which approximately 20 per cent of the world’s oil passes, and any disruption to shipping through the waterway has immediate and severe consequences for economies that rely on Gulf crude .
Trump announced on Saturday that the US Navy would begin “the process of blockading” ships entering or leaving the Strait of Hormuz, effective immediately, after Iran rejected US demands to end its uranium enrichment program, stop funding Hamas and Hezbollah, and open the strait . The president warned that any Iranian forces firing on US or civilian vessels would be “BLOWN TO HELL” and said other countries would be involved in the effort . He also claimed that the US would begin removing mines he said were placed in the strait by Iran . The blockade represents a significant escalation in the economic warfare between the two nations, coming after marathon peace talks in Islamabad ended without a deal .
Asia’s energy-dependent economies are particularly vulnerable to the blockade, as many rely on Gulf oil shipped through the strait . Japan, South Korea, India, and China are among the largest importers of crude from Saudi Arabia, the United Arab Emirates, and other Gulf producers . The disruption of shipping through the strait forces these nations to seek alternative supplies from more distant sources, driving up transportation costs and increasing the risk of supply shortages . The International Energy Agency has warned that prolonged disruption could trigger a global recession, with oil-dependent industries facing crippling cost increases that would be passed on to consumers in the form of higher prices for everything from petrol to plastics .
