Energy and trade specialists are cautioning about a domino effect on worldwide supply networks, which will only escalate as the conflict between the U.S. and Israel with Iran continues and the Strait of Hormuz remains inaccessible.
While much attention is currently on oil markets, the closure of the strait during the 12-day conflict has prevented approximately 250 million barrels of oil from being shipped out of the Persian Gulf, leading to a surge in fuel prices globally. However, the impact extends beyond oil.
According to Jim Krane, an energy expert at Rice University, the world should prepare for disruptions in the supply of essential metals such as copper, nickel, and cobalt originating from the Gulf region. Nearly half of the global urea supply, a widely used fertilizer, also comes from this area.
Krane emphasized the critical role of the strait in the global economy, stating that its closure is causing ripple effects across various industries. Already, a major aluminum producer in Bahrain has declared force majeure, suspending deliveries.
Qatar, a significant liquefied natural gas exporter, announced a production halt at its facilities and informed clients of delivery delays. Even if the strait were to reopen immediately, it would take months to resolve the resulting disruptions, as stated by Jeff Currie, CEO of the Carlyle Group.
The conflict has also raised concerns in South Korea, where chip makers fear disruptions in semiconductor production due to potential material shortages from the Middle East. South Korea is a major chip supplier globally, while Qatar is one of the few helium producers, crucial for cooling equipment during semiconductor manufacturing.
Experts warn that while the current oil and gas shortages have increased costs, the full impact of a prolonged closure of the Strait of Hormuz has not been fully realized. Ongoing disruptions are expected to drive prices higher in wealthier nations and lead to shortages in poorer countries.
As the call for a co-ordinated release of oil reserves gains momentum, uncertainties persist about the resolution of the conflict. The global economy faces risks as each passing day brings the potential for the war to escalate further and exacerbate supply chain disruptions.
