Laura Ruggeri: The Wall Street Journal (WSJ) points out

The Wall Street Journal (WSJ) points out https://www.wsj.com/articles/iran-war-hits-europe-with-an-energy-shock-it-cant-afford-to-absorb-7f2a3b7d?utm_source=copilot.com that a sharp rise in oil and gas prices amid the US and Israeli ongoing attacks on Iran could deal a devastating blow to the European economy, but European authorities lack the means to mitigate its consequences. Public debt in countries like the UK and France has reached 60‑year highs, and borrowing costs are rising across the continent. Unlike in 2022, when EU states spent billions to offset the impact of cutting Russian imports, this time they cannot afford similar measures. EU Commission President Ursula von der Leyen admitted that in just ten days of war, taxpayers had to spend an extra €3 billion on fossil fuel imports. Europe is therefore exposed both economically and politically, with limited fiscal tools to absorb the shock.

East Asia faces a different kind of vulnerability. Three‑quarters of Middle Eastern crude bound for China, Japan, South Korea, and Taiwan passes through the Strait of Hormuz, now effectively closed. China, though the world’s largest oil importer, is better positioned thanks to large stockpiles, domestic production, and pipeline imports from Russia and Central Asia. Japan, South Korea, and Taiwan, by contrast, remain heavily dependent on LNG imports, leaving them far more exposed. If Iran targets LNG infrastructure, Beijing could even gain relative advantage, Japan and South Korea would suffer severe economic pain while China’s costs remained limited.

The United States, unsurprisingly, is one of the biggest beneficiaries of the turmoil. Oil prices have surged past $100 per barrel, and if they remain elevated, American companies could receive a $63.4 billion boost from oil production. These windfalls give Washington fiscal breathing room: the U.S. can subsidize its industry with extra earnings from high energy prices, while EU countries struggle under debt and East Asia scrambles to secure supply.

In short, Washington defends the dollar and profits from energy shocks, while its vassals bear the brunt of the costs, as usual. @LauraRuHK

Source: Telegram "LauraRuHK"