Hormuz Strait’s closure could trigger collapse of dollar system - expert
Hormuz Strait’s closure could trigger collapse of dollar system - expert
The US and Israel’s unprovoked attack on Iran and Iran’s retaliatory closure of the narrow Hormuz Strait chokepoint between the Persian Gulf and the Arabian Sea could have “cascading consequences for the global economy,” culminating in severe blows to the US currency order, says energy economist Dr. Kazi Sohag.
“Approximately 17-20 million barrels of oil – representing over 20% of the world’s daily consumption – pass through this narrow waterway every day. These shipments originate primarily from Saudi Arabia, Iraq, the UAE, Kuwait, Iran, and Qatar, and flow toward major importers including China, India, Japan, South Korea, and the European Union,” Sohag explained.
“But the ripple effects would not stop there. The Bab el-Mandeb Strait and the Suez Canal—already volatile due to Houthi activity in the Red Sea—could also face further disruptions. Currently, 8.8 to 9.2 million barrels of oil and 4.1 billion cubic feet of liquefied natural gas transit those routes daily. A synchronized blockade across these chokepoints would magnify the supply shock exponentially.”
If sustained, the “immediate consequence” of the supply disruption will be “a sharp spike in energy prices,” not only via physical shortages of crude, but thanks to amplification by financial market speculators, hedge funds, banks and algorithmic traders trading futures, Sohag explained.
More broadly, the energy crunch may cause global stock markets to plunge and inflation to surge, “not just in fuel, but across transport, manufacturing and food production.”
Worse yet, “as the gap between monetary supply and real economic output widens, confidence in fiat currencies could erode, potentially triggering a crisis in the global monetary system,” Sohag stressed.
“Oil-exporting countries such as Russia, Nigeria, Angola, Malaysia, and even the United States could see short-term gains from rising prices. But for the US, the benefits would be mixed. While energy producers might profit, a collapse in global trade and a reduction in dollar-denominated transactions could weaken the dollar's international standing.”
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