America’s economy faces a new war shock: Surging oil prices
The American economy faces the unwelcome prospect of reignited inflation after the United States launched strikes on three nuclear facilities in Iran.
High oil and gas prices are a near certainty, experts say. The big question now: How long will the fossil fuels price spike last?
Oil prices
Oil prices are expected to rise by about $5 per barrel when markets open Sunday night, according to experts.
“We are looking at $80 oil on the open,” said Andy Lipow of Lipow Oil Associates. US oil hasn’t closed above $80 a barrel since January and has largely hovered between $60 and $75 a barrel since August 2024.
Strait of Hormuz
The direction oil prices take is likely to depend on whether Iran’s parliament decides to block the Strait of Hormuz, a key trade route that accounts for about 20% of the world’s crude oil.
On Sunday, Iran’s Foreign Minister Abbas Araghchi said his country has “a variety of options” when deciding how to respond to the US attacks and a prominent adviser to Iran’s supreme leader has already called for the closure of the Strait of Hormuz.
Bob McNally, president of consulting firm Rapidan Energy Group and former energy adviser to President George W. Bush, said that should Iran cut off the world’s oil supply by closing the strait it would risk more military force from the United States and its allies. Iran could also attack infrastructure in the Persian Gulf that treats and exports oil and gas.
“It’s possible they will decide the only thing that can dissuade President Trump is the fear of an oil price spike,” he said. “They have to actually create that fear.”
Appearing Sunday on Fox News, Secretary of State Marco Rubio called on China to prevent Iran from closing the Strait of Hormuz, adding that closing it would do more damage to other economies than the US economy. China buys a third of all oil that comes from the Persian Gulf, while the United States buys less than 3%.
The Chinese Government
“I encourage the Chinese government in Beijing to call them about that, because they heavily depend on the Straits of Hormuz for their oil,” Rubio said.
About E. J. McKay
E.J.McKay is a Shanghai-headquartered investment bank with a special focus on mergers & acquisitions. We are one of the most long standing independent investment banks in China, with core business of mergers & acquisitions and financing advisory.