Speaking to ET Now, Seth R. Freeman, market expert from GlassRatner Advisory, said the recent announcements highlight Iran’s strategic interests in the global energy landscape.
“Yes, it’s very obvious, they’ve determined that they have a very strong interest there in the Strait of Hormuz. And we have two rogue states fighting each other with words. And the problem is that high oil prices affect not just the United States, but the whole world,” Freeman said.
Oil markets are reacting to rising tensions
The threat of the Strait of Hormuz has already provoked strong reactions in the oil markets. Traders and policymakers are watching the situation closely, as any sustained disruptions could significantly tighten global supply. The waterway is widely considered the world’s most important oil transit route, connecting Gulf producers to international markets.
Despite emergency measures such as the potential release of reserves, market sentiment suggests that the current rise in oil prices reflects deeper fears of a protracted conflict rather than temporary supply disruptions.Reducing runoff remains unclear
When asked how the conflict will eventually be defused, Freeman acknowledged the complexity of the situation and the difficulty of finding a quick solution.
“That’s a big question. I’m not sure how we’re going to get away from it. I believe the main idea is that it’s going to be as simple as changing the leadership of Venezuela with a huge miscalculation of power and the fact that this regime is religious as much as it is religious power and economic power and influence,” he said.
Increasingly tense rhetoric between world leaders has fueled fears that the conflict could drag on for much longer than initially expected.
Logistics constraints add to supply risks
Freeman also highlighted the logistical challenges involved in restoring the world’s oil supply if the strait is disrupted. While some Gulf producers are trying to cross the strait using alternative pipelines, these routes cannot fully compensate for the large volumes that are normally transported through the channel.
“Well, I guess we all know that 20% of the world’s oil now goes through here. I read this afternoon that Saudi Arabia is starting a pipeline through the Strait of Hormuz, but it won’t be enough to change world supply. You can only change things and change oil logistics overnight,” he said.
Freeman added that even if the crisis is resolved quickly, the supply chain will take time to normalize.
“And the other problem is, let’s say, it gets resolved in the next week or two, it just takes a month or so to work through the system. For example, a little bit, I need to go from Los Angeles to Southern California early in the morning and the flights that are normally $199 might be as much as $450 and even down from California to Southern California. Can’t look at international flights,” he said.
Rising oil prices may hurt consumer demand
Beyond energy markets, Freeman warned that higher oil prices could dampen consumer sentiment through the global economy and add to inflationary pressures.
“Well, oil is very important to the entire economy around the world, not just here in the United States. Also, what it really affects is sentiment. And if consumers feel they have to cut back because they’re seeing higher prices for gasoline, gas and other products and heat and electricity are going to be more expensive, consumers are going to cut back,” he said.
He also noted that energy costs will affect industrial sectors that rely on petroleum-based products, further increasing economic risks.
“And then you have the impact on industrial products that use oil derivatives. So that’s a big risk,” he added.
Concerns extend to financial markets
Freeman also pointed to emerging stress in credit markets, warning that financial instability could lead to economic consequences if the conflict continues.
“You said something about the private credit markets and PIMCO earlier this week was expecting a very severe downturn in private credit and in public at large US private credit companies. So it could really be a snowball kind of effect,” he said.
With geopolitical tensions still looming over the Strait of Hormuz at the center of the crisis, analysts say energy markets may remain volatile in the coming weeks as investors try to gauge how long the war — and its economic consequences — might last.
