Global Trade in Oil, Gas Could Be Rattled by Iran

About a week ago, the United States authorized airstrikes targeting nuclear facilities in Iran, in collaboration with Israel. Their objective, similar to that of Israel, was to slow down the development of the Middle Eastern country’s nuclear program. 

The airstrikes were a result of growing conflict between Iran and Israel, which has caused concerns globally over the last couple of decades. 

Now, Iran is working to close the Strait of Hormuz, which plays a crucial role in global trade. It is the main export route for gas and oil-rich nations like Iran, Saudi Arabia, the United Arab Emirates, Qatar, Kuwait, and Iraq. Figures from 2023 estimate that about 25% and 20% of oil and LNG is ferried through the strait annually. 

Iran controls the Northern side of this maritime point, which provides sea passage from the Persian Gulf to the open ocean. The country has an established military presence in the region, comprising anti-ship missiles and naval vessels, which help ensure that Iran holds the power to exert its influence and control over this strait. 

In a recent sitting, the Iranian parliament backed a motion to shut down its part of the strait, with legislators arguing that this would escalate pressure on America and its allies. 

While America’s dependence on energy resources from Gulf nations is minimal, the country is strongly invested in ensuring the free flow of these resources to the international markets. Shutting down the strait would set off a chain reaction throughout the gas and oil industry worldwide, fueling volatility in oil prices. 

Goldman Sachs argues that a 50% reduction in oil shipments monthly passing through the route for nearly a year would see the average oil price shoot to $110 per barrel. 

While there are operational pipelines in the UAE and Saudi Arabia that help ferry some oil, their capacity is considerably lower than the twenty million barrels that usually pass through the strait. The Asia-Pacific region would be most at risk if the strait is closed, as it heavily depends on oil from the Gulf. 

Given that China imports roughly 90% of oil exports from Iran, such a situation would cause shortages while also intensifying inflation as well as economic uncertainty globally. 

Countries in the Gulf that largely rely on oil exports to enhance their GDPs would also suffer. This includes Iran, whose gas and oil revenue accounts for over 24% of its economy. It remains to be seen whether it will go ahead with its plan, once a final decision is made by the Supreme National Security Council and Iran’s Supreme Leader, Ali Khamenei. 

This threat to the global market for oil and gas will be closely watched by industry actors like GEMXX Corp. (OTC: GEMZ) since any adverse events in the Middle East can upend the established supply chains of these commodities. 

NOTE TO INVESTORS: The latest news and updates relating to GEMXX Corp. (OTC: GEMZ) are available in the company’s newsroom at https://ibn.fm/GEMZ 

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