Is a new global oil crisis inevitable?

The global market is witnessing a dramatic surge of oil prices. This is provoked by escalating tensions between the USA and Iran where the former is dispatching warships to the Gulf of Oman, and the latter is resuming greater uranium enrichment. There was a similar situation in remote 1973 when the era of global economic growth following World War II abruptly ended by a sharp increase in the cost of crude oil.

How is Trump reducing the global economy to disaster with his ongoing teasing of Iran?

Obviously, the notorious embargo proposed by OPEC during the Yom Kippur war is the main culprit to blame. For a too long time, the West was enjoying low oil prices swinging at the level of 2 USA dollars per barrel. But just a few weeks pass, and the western countries have to put up with a changed economic reality: $11 for a barrel of crude. It hurts. And life will never be the same. Inflation is soaring, growth is cooling, and unemployment is taking to a new level. Even in the 1930s, things were not so bad as today.

Oil, the Great and Terrible

Crude has become an economic weapon. And there is only one explanation of military conflicts between Iran and the USA in the Strait of Hormuz: driving by harsh American sanctions and an abnormal desire of Trump to control the Iranian economy, Tehran is about to mess with the American economy, too. Who is to suffer? The rest world.

While the USA and Iran oil tankers are playing the gotcha game with each other, a new economic crisis is sneaking up. Slowly but steadily. The US economy is weakening because of the never-ending trade conflict with China, the strange policy of the Federal Reserve and the Central Bank pointed at increasing interest rates and aggressive import tariffs. All these factors cannot help but affect the world markets and damage business confidence.

China is not keen to take active measures to stimulate its impaired economy, while Europe’s exemplary export-based economic model is proving its ineffectiveness. Why? Countries are simply afraid of putting their trade ships into the Gulf of Oman that long was regarded as the key gateway for crude exports. No one wants to be involved in the marine confrontation between two nuclear powers.

Just look at the key incidents between the USA and Iran in the Gulf of Oman to understand why the rest world is shivering:

  • In May 2019, a year after quitting the nuclear agreement, the USA publicly claims the Iranian Corps of the Guards of the Islamic Revolution (IRGC) to be a terror group. By doing so, America virtually called the key unit of the Iranian army terrorists. In addition, the USA also claimed that they would send more soldiers and defense equipment to the Persian Gulf.
  • May 12: a strange assault on four U.A.E. commercial oil-ships near the eastern coast of the Gulf. Three of them were transporting oil to Saudi Arabia. No country took responsibility for those sabotage operations.
  • May 14: a number of attacks on Saudi oil pipelines from military drones. Yemen’s Houthi rebels, who are supposed to receive financial support from Iran, took responsibility for those attacks.
  • May 19: a rocket fell in proximity to the USA Embassy in Iraq. No one was injured during this provocation, but Trump reacted to this incident in his Tweeter, saying that it may become the beginning of the end for Iran.
  • June 13: another attack on crude tankers in waters of the Strait of Hormuz – those tankers were sailing under the Japanese and Norwegian flags. America officially accused IRGC of this sabotage. As proof, the USA presented a video showing how Iranian soldiers were removing a bomb that had not exploded from one of the assaulted oil-ships. In addition, crew members of those tankers also reported seeing Iranian boats.
  • June 18: America announced that, due to an escalation of frictions in the Gulf of Oman, they would send even more military assets to the region. However, this did not frighten Iran, and the very next day the IRGC officially claimed that it had destroyed one of best USA drones, Global Hawk. The Iranian military insisted that the drone violated the country’s airspace, while the USA contradicted to that statement saying their drone was operating in multinational waters.

Surely, there are people claiming than the world economy got finally off the oil needle and will be right, but not completely. Crude still matters much. There are even people believing that the USA’s sanctions against Iran are a short-term measure to force Tehran to sign a nuclear agreement with Washington. But the increased import tariffs for China were also meant to be short-term, but they have been lasting over a year already. And the only chance for China to stop that senseless trade war is to wait for a new leader to come to power in the USA, but this may happen only in 18 months after presidential elections in America.

Clashes in the Middle East took a serious twist and may trigger something awful. The question is: when will the global economy stop malfunctioning and start taking real measures to save the world from an imminent oil shock?