World stares at oil shock, higher inflation as Iran mulls Hormuz shut down

Iran’s parliament has voted to shut down the vital Hormuz shipping channel in retaliation against Donald Trump’s attack on the country, prompting fears of a sharp spike in oil prices that could cause a global recession.

A barrel of Brent crude was selling for about $77 on Friday, having risen by more than 10% since mid-June when Israel’s attack on Iranian nuclear sites prompted missile strikes from Tehran against Tel Aviv.

But Trump’s decision to follow Israel by launching a US attack on Iran has set off a chain of events that analysts warned could drive prices up much further when markets open at 11pm UK time on Sunday.

A fifth of the world’s oil consumption flows through the strait of Hormuz, which is a gateway out of the Persian Gulf.

The vote, reported by Reuters, is not binding because the final decision rests with Iran’s supreme national security council. But analysts were already predicting an spike of up to $5 before the result of the vote was known.

“An oil price jump is expected,” said Jorge León, the head of geopolitical analysis at the energy intelligence firm Rystad and a former official at Opec, the group of major oil-producing nations. “In an extreme scenario where Iran responds with direct strikes or targets regional oil infrastructure, oil prices will surge sharply. Even in the absence of immediate retaliation, markets are likely to price in a higher geopolitical risk premium.”