Iranian authorities have issued a stark warning that oil prices could rise to $200 per barrel. barrel as the Islamic Republic escalates its military campaign in the strategic Strait of Hormuz and vows to cut off all oil shipments to the United States and its allies.
The warning follows at least three vessels being hit by projectiles in the vital chokehold on Wednesday 11 March.
The price increase to $200 per barrel has consequences beyond geopolitical sabre-rattling, directly affecting household budgets globally.
The most immediate impact affects motorists worldwide.
It is expected that gas prices in the United States may rise above $6 per gallon. Europeans, already paying $6 to $8 per gallon with taxes, could see prices reach $10 or more.
In developing countries in the region, fuel costs can become prohibitive, forcing families to choose between commuting and eating.
In addition to oil prices, fertilizer prices are also at risk. The World Food Program warns that every dollar increase in oil prices pushes millions closer to starvation.
Heating of homes and demand for electricity will follow crude oil prices upwards.
For Europe, which is currently suffering from an energy crisis, heating costs in winter may no longer be affordable for millions of people.
For developing countries, where governments often heavily subsidize electricity costs, this could mean severe cuts in other areas of public spending or even blackouts.
Air conditioning in sweltering Middle Eastern and South Asian summers may no longer be affordable.
The conditions can create a ripple effect that affects everything, everywhere, at once.
Manufacturing grinds slower as energy costs rise. With high energy prices, production comes to a standstill.
In China, factories are already facing impossible margins.
Dealers from Lagos to London are raising prices. Airlines hold on to fuel surcharges, making travel unaffordable for ordinary families.
Additionally, ride-hailing services are getting too expensive and delivery apps are adding fees.
The International Monetary Fund (IMF) issued a stark warning that sustained $200 oil could shave 1.5 to 2% points off global GDP, enough to tip several economies into recession.
Although the conflict is between the US, Israel and Iran, the whole world is paying the price.
