The next scenario is the closure of the Strait of Hormuz. Could it be the trigger for a bear market? Let's analyze from all perspectives!!!
The closure of the Strait of Hormuz will have multiple impacts, mainly including the following:
Oil prices soar: The Strait of Hormuz accounts for about one-fifth of global crude oil transportation and 20% of global liquefied natural gas (LNG) trade. If the strait is closed, oil exports from the Middle East will be severely affected, leading to a global supply shortage and a significant rise in oil prices. Some institutions predict that in extreme cases, oil prices could soar to $120 - $130 per barrel.
Energy supply tightens: Countries such as China, India, Japan, and South Korea in Asia are the main destinations for crude oil transported through the Strait of Hormuz, accounting for 69% of the total flow of crude oil and condensate from the Strait in 2024. These regions may be most affected by supply disruptions from the Strait.
Transport costs rise: The increase in oil prices will sharply raise fuel costs for transportation companies, leading to significantly higher freight rates to maintain profits. Global shipping costs may rise by 30% - 50%, logistics companies will face soaring operational costs and risks of loss or bankruptcy, and a large number of flights may reduce schedules or even be grounded.
Commodity prices rise: The increase in oil prices will drive up the prices of electricity, natural gas, and other energy sources, raising raw material costs for manufacturing companies. Costs in the petrochemical supply chain, such as plastics and synthetic fibers, will also surge, leading to rising prices for various commodities and triggering global inflation.
Market volatility intensifies: Global financial markets will fall into panic as investors become concerned about future economic prospects. Sectors such as aviation, technology, and consumer goods in the stock market will suffer due to soaring fuel costs, declining risk appetite, and inflationary pressures; while risk-averse asset sectors such as energy and gold will benefit, with gold prices likely to surge and even break historical highs.
Tensions escalate: If the Strait of Hormuz is blocked, it may trigger severe geopolitical shocks. Countries and organizations such as the United States, the European Union, NATO, India, and Japan may be forced to intervene due to concerns over shipping security. Once energy security overlaps with military interests, the situation can easily spiral out of control, evolving into regional or even global conflicts.
