Global stock markets remained subdued on Monday, largely shrugging off an initial spike in oil prices that occurred over the weekend. This cautious stance indicates that while the immediate shock from the Iranian parliament’s threat to close the Strait of Hormuz has lessened, underlying concerns about the broader US-Iran conflict persist. The International Monetary Fund’s chief, Kristalina Georgieva, has explicitly warned that US strikes on Iran could significantly harm global economic growth.
The initial surge saw oil prices jump over 5% on Sunday to a five-month high of $81.40, following the Iranian parliament’s vote to consider shutting down the Strait of Hormuz, a vital conduit for a fifth of the world’s oil consumption, in retaliation for a US attack. However, Brent crude later fell nearly 1% on Monday, settling just over $76 a barrel, demonstrating the market’s attempt to recalibrate.
Despite this recent dip, the potential for dramatically higher prices remains, with Goldman Sachs estimating that oil could hit $110 a barrel if Hormuz flows are halved for a month and then remain 10% lower for the subsequent eleven months. This underscores the potential for severe economic consequences of a prolonged disruption.
In diplomatic efforts, US Secretary of State Marco Rubio has called any closure of the strait “economic suicide” for Iran and has urged China to use its influence, given its heavy reliance on the waterway. Analysts at RBC Capital Markets are also advising caution, warning of “clear and present risk of energy attacks” from Iranian-backed militias and emphasizing that the situation remains fluid, as evidenced by two supertankers reportedly changing course in the strait.