Your Independent Journal from the Heartland
President Donald Trump’s unprovoked and unconstitutional war against Iran is sending shockwaves across the global economy in the form of skyrocketing oil prices and diving financial markets, Brad Reed noted at Common Dreams (3/9).
The prices of both Brent crude oil and WTI crude oil futures on March 9, the 10th day since Trump ordered the attack on Iran, surged past $100 per barrel, as countries across the Middle East announced production cuts in the wake of chaos and destruction caused by the Iran war.
The impact of the price surge on the US stock market was immediate, as the Dow Jones Industrial Average opened Monday trading down by more than 600 points, while the Nasdaq dropped by 300 points.
According to a report from the Wall Street Journal, both Iraq and Kuwait have announced oil production curbs because they have been unable to ship their supply through the Strait of Hormuz and have thus run out of space to store excess petroleum.
JPMorgan Chase analyst Natasha Kaneva noted to the Journal that this is the first time in recorded history that the Strait of Hormuz has ever been completely closed off for shipping, and warned the economic consequences would be severe.
“To me, it was not just the worst-case scenario,” Kaneva said of the strait’s closing. “It was an unthinkable scenario.”
The Journal wrote that Trump’s decision to launch a war with Iran has already sparked “the most severe energy crisis since the 1970s,” which is now “threatening the global economy.”
Petroleum industry analyst Patrick De Haan wrote in a March 9 analysis that US drivers should expect to feel the impact of this oil shock in the coming days.
“Gasoline prices in many states could climb another 20 to 50 cents per gallon this week, with price-cycling markets potentially seeing increases as early as today,” De Haan projected. “Diesel may rise even more sharply, with increases of 35 to 75 cents per gallon possible as global distillate markets react.”
In a March 9 analysis posted on his Substack page, Nobel Prize-winning economist Paul Krugman dove into the logistics of stopping and restarting oil production, and argued that the impact of the strait’s closure will grow significantly as time goes on.
“As the Strait remains closed, producers are shutting down, and this isn’t like turning off a tap that can be quickly restarted,” Krugman explained. “There’s apparently a real nonlinearity here: a two-week closure of the Strait has much more than twice the adverse impact on global oil supply as a one-week closure. If this goes on for multiple weeks... oil prices, which retreated slightly off their highs early this morning, could go much higher.”
Krugman said that the shock was not yet bad enough to make an economic crisis inevitable because the US is much less dependent on oil than it was in the 1970s.
Nonetheless, Krugman cautioned, “the situation is scary.”
Punchbowl News noted that Trump has not been helping his party by expressing indifference bordering on hostility to Americans’ concerns about how his war will impact their personal finances.
“Short term oil prices, which will drop rapidly when the destruction of the Iran nuclear threat is over, is a very small price to pay for U.S.A., and World, Safety and Peace,” Trump wrote in a March 8 Truth Social post.
