Abdulkadir Selvi Discusses Concerns Over Potential Oil Price Surge to $120 Due to Iran’s Strait of Hormuz Closure
Rising Regional Tensions and Their Economic Impact
Recent military actions by Israel against Iran have significantly heightened tensions across the Middle East. The escalation has not only resulted in geopolitical instability but also raised concerns about potential repercussions on global markets. Renowned columnist Abdulkadir Selvi from Hürriyet analyzed the possible economic consequences stemming from this conflict.
In his insightful commentary, Selvi highlighted the fragile relationship between regional security and economic stability, emphasizing that "conflicts are not limited to geopolitical boundaries; they ripple through the global economy." He pointed out that during times of crisis, commodities such as gold and oil tend to become more volatile, reflecting investors' flight to safety and fears of supply disruptions.
Market Reactions and Price Fluctuations
Over the weekend, despite markets being closed, oil prices surged by approximately 6%, with crude oil temporarily surpassing the $80 per barrel threshold. Gold, traditionally viewed as a safe haven asset amid turmoil, also experienced notable gains. The price of gold per gram reached 4,358 lira, while quarter gold climbed to 7,194 lira. Additionally, bullion gold appreciated by around 1.6%. Meanwhile, the US dollar experienced a modest rise, reaching 39.43 lira, before partially retreating.
The Strait of Hormuz: A Critical Chokepoint
Selvi delved into the geopolitical risks associated with the Strait of Hormuz, a vital maritime corridor for global energy supplies. He explained that if Iran were to block this strategic strait, there could be significant repercussions, including a surge in oil prices potentially reaching between $120 and $130 per barrel. This narrow waterway accounts for approximately 20% of the world's oil exports.
The Strait, located between Iran and Oman, connects the Gulf of Oman to the Persian Gulf. Its narrowest point measures only 33 kilometers across, serving as a crucial shipping route where about 3 kilometers of waterway on each side facilitates the transit of oil and LNG. Iran, Saudi Arabia, and the United Arab Emirates conduct around 80% of their oil and liquefied natural gas (LNG) trade through this vital corridor.
Potential Duration and Economic Consequences
Selvi cautioned that ongoing hostilities between Israel and Iran could persist for an extended period, influencing global markets depending on the duration and intensity of the conflict. If the fighting continues beyond a planned two-week period, there are growing fears of severe economic repercussions, including disruptions in energy supplies and increased inflationary pressures worldwide.
However, he also underscored that a swift resolution might limit the economic damage, though some impact—such as elevated missile-related costs—would likely remain. The overall effect on the global economy hinges on how long the conflict endures and whether regional tensions escalate further.
Location and Significance of the Strait of Hormuz
The strategic waterway is situated between Iran and Oman, serving as a crucial artery for international energy transportation. The narrowest point of the strait spans just 33 kilometers, and it encompasses a shipping corridor approximately 3 kilometers wide on either side, making it one of the most vital and sensitive maritime passages in the world.
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