strait of hormuz
The Strait of Hormuz is considered one of the most important sea routes in the world. It connects the Persian Gulf to the Arabian Sea and through this route about 20% of the world’s crude oil and a large amount of LNG is supplied. Big oil producing countries like Saudi Arabia, Iraq, UAE, Kuwait, Qatar and Iran send their oil tankers across the world through this route.
If toll tax is imposed on this sea route or additional fees are started being collected from ships, then it can have a direct impact on the economy of the entire world. Because as soon as transportation of oil and gas becomes expensive, energy costs will increase.
Big threat to the world economy
Experts believe that if the toll or tension in Hormuz continues for a long time, its impact will not be limited to the oil market only. It can affect global trade, inflation, stock market, currency and even economic growth rate. This is the reason why the world’s major powers always try to maintain stability in Hormuz, because even a small disruption here can shake the economy of the entire world.
There may be a huge rise in oil prices
The biggest impact of toll in Hormuz will be seen on crude oil prices. If shipping companies and oil importers have to pay additional duty, they will pass this burden on to customers. Due to this, the prices of crude oil can increase rapidly in the international market.
Experts believe that if the toll or any kind of disruption lasts for a long time, then Brent crude can go around $ 150 per barrel. This will affect all fuel prices like petrol, diesel, ATF, LPG and CNG.
Most pressure on countries like India
India is the third largest oil importer in the world and buys about 85% of its crude oil requirement from abroad. A large part of India comes from West Asia, which passes through the Strait of Hormuz.
If oil becomes expensive due to the imposition of toll on this route, then India’s import bill will increase rapidly. Due to this, subsidy pressure on the government may increase and petrol and diesel may become expensive for the common people. Due to increase in transport costs, everything from food items to everyday items can become expensive.
Impact on inflation and interest rates
The effect of oil becoming expensive is not limited to fuel only. Almost every sector is affected by increasing transportation and manufacturing costs. Expenses of airline companies will increase, shipping will become expensive and production costs of factories will also go up.
This may increase inflation worldwide. If inflation increases, central banks of many countries can keep interest rates high. Its effect will also be visible on loans, EMIs, investments and stock market.
Movement in stock market and currency market
Any kind of crisis or toll system in Hormuz can increase the concern of investors. The currencies of oil importing countries may weaken. In countries like India, the rupee may come under pressure against the dollar because more dollars will be spent to buy more oil.
Huge fluctuations can also be seen in the stock market. Companies in the airline, paint, chemical and transport sectors may be affected the most. At the same time, shares of oil and gas companies may rise.
Impact on China, Europe and Asia also
Hormuz is a very important route not only for India but also for China, Japan, South Korea and many countries of Europe. China is dependent on West Asia for its major oil needs. In such a situation, any additional cost in Hormuz can affect the growth of Asian economies. Europe is already struggling with energy crisis and inflation. In such a situation, the new inflation of oil and gas can slow down the pace of global economic recovery.
Trying to find alternative supply routes
If the crisis or toll-like situation in Hormuz continues for a long time, then many countries will start looking for alternative supply routes. Oil purchases from pipeline network, Russia, America, Brazil and African countries may increase. India is already buying more oil from Russia, Venezuela and Brazil to reduce its dependence on West Asia. However, creating a complete alternative will not be easy because Hormuz still remains the world’s most important energy supply line.
