Iran's Threat to Global Economy: The Hormuz Strait Dilemma

Iran threatens to close the entire Hormuz Strait to maritime traffic, a move that could crash the global economy. Meanwhile, the U.S. appears to be preparing for war, a development with enormous consequences and a more likely scenario.

"What Iran has left is to strike at the global economy," says Henrik Wachtmeister, a lecturer at Uppsala University.

Tehran has once again reiterated its threat to completely close the Hormuz Strait to shipping traffic.

This would result in oil prices soaring to unprecedented levels—up to $300 per barrel, according to calculations by Daniel Spiros and Henrik Wachtmeister, both researchers at Uppsala University.

The global economy would plunge into a deep recession.

"We would enter a very serious global recession. All energy prices would rise significantly, especially gasoline and diesel, and thus other forms of energy as well. This means we would experience very high inflation while production would come to a halt," says Daniel Spiro, lecturer and associate professor at the Department of Economics.

Daniel Spiro believes the risks of Iran following through are small.

"Both Saudi Arabia and the U.S. would intervene in the conflict. I don't think Trump would accept Iran blackmailing the world in this way. I don't think Iran dares, nor do they have the capacity."

American Involvement – The Greatest Risk

Even though he assesses the risks of the Hormuz Strait being closed as small, the escalation of the war is worrying.

Donald Trump chose to leave the G7 meeting early, and it has been reported overnight that an emergency meeting is being prepared in the so-called "situation room" with the National Security Council when he returns to the White House.

In addition to the large American aircraft carrier USS Nimitz, the U.S. is sending a significant number of tanker aircraft to Europe.

"The greater risks lie in whether the war becomes so extensive that the U.S. gets involved, leading to actual warfare around the Persian Gulf. Then it becomes very difficult to transport oil."

"One of the Last Cards Iran Has"

Since 1980, the U.S. has had the stated policy of using military means to protect its interests in the Persian Gulf. Should Iran attack oil tankers, close the strait, or otherwise attack oil infrastructure in, for example, Saudi Arabia, the U.S. will respond militarily.

Sweden's former Foreign Minister Carl Bildt (M) analyzes that the U.S. is preparing for war.

If they intervene without being attacked first, the risks increase that Iran will attack the energy flow, believes Henrik Wachtmeister, acting lecturer in energy systems at Uppsala University and researcher at the Swedish Institute of International Affairs.

"It's one of the last cards Iran has, and if the U.S. is already involved, the risk of an Iranian counter-move increases."