.jpg)
3 hours ago
1
Article content
Holder: On Sunday, Iranian and state TV reported that Parliament has approved a measure to close the strait. That doesn’t mean it’s happening. They need more than just parliamentary approval, but can you game it out for us? What would shutting down the strait mean for global trade, even short term?
Article content
Blas: Every day that we were to lose 20% of the global supply will increase the price of oil significantly. And if we were to be only a few days of the shutdown, there will be panic buying, particularly for countries that depend on Middle Eastern oil for a lot of the supply—I’m thinking about China, India, Japan, South Korea, Taiwan.
Article content
So those countries will go into the market that will buy oil from whatever other origin or whatever other price, and the price will go up a lot. Will the price stop at a hundred dollars? No, I don’t think so. I think that will go significantly higher than a hundred dollars.
Article content
Holder: We would get our triple digit oil prices.
Article content
Blas: Yeah, we will have, absolutely, we will have triple digit oil prices, but how likely is that? Very, very unlikely.
Article content
Holder: Just so I understand, what are Iran’s incentives to close the Strait of Hormuz right now in the middle of this conflict and what’s the main incentive not to close the Strait?
Article content
Article content
Blas: The main incentive for Iran to close the Strait of Hormuz will be to weaponize oil, to turn oil into part of the conflict. Potentially to force the United States to talk to Israel, so Israel stops the bombing and the United States thinks twice in the future about bombing Iran. It is just using oil as a weapon and force, probably a diplomatic negotiation around the world. That is the biggest upside for Iran to close the Strait of Hormuz.
Article content
Holder: So saying, ‘you thought you were insulated from oil supply, but you’re not — like, you really need us.’
Article content
Blas: Yeah. And, and it just — generally the United States, even if the United States suffers, not a lot. The United States has an interest in healthy global economic growth, so other allies will suffer. Japan will suffer, Korea will suffer, the European countries will suffer, and typically that’s not in the interest of the United States.
Article content
The biggest downside for Iran is that, you close the Strait of Hormuz, no one can export oil, and that includes Iran. And for the Iranian regime, oil is really the cash cow. That’s where the money is coming. So yes, Iran will close the Strait of Hormuz and it will create trouble for everyone else, but it will shoot themselves on the foot because they cannot sell their oil.
Article content
Article content
It will also hurt some of the biggest allies of Iran like China and China will not really enjoy that, and I don’t think that Iran can afford losing diplomatic support from China right now.
Article content
My personal view is that Iran will not close the Strait of Hormuz. I don’t think that they have — when you put everything on balance — a good incentive to do it. Can it happen? I suppose that one should not say never, but I don’t see it.
Article content
Holder: So maybe the closing the Strait of Hormuz isn’t the biggest concern that we should be thinking about right now. Are there other major risks that war in the Middle East raises for the global oil trade or, or energy markets overall?
Article content
Blas: I do think that there are other big risks and perhaps they don’t get as much attention, but they’re more important. The Saudi oil fields are within range of Iranian missiles and, a proxy of Iran, the Houthis of Yemen attack some Saudi oil fields in 2019, disrupting supply significantly, even for a brief period of time. Do I think that that’s likely? Again, I don’t think so, but that will be far more devastating that anything happening in the Strait of Hormuz and to me, that is perhaps the worst case scenario that few are talking about.
English (US)