Analyst: Oil Prices Hit Over Two-Year High, Current Situation Poses Real Risk to Global Economy

Odaily According to a warning from Qatar's Energy Minister that all oil production in the Gulf region could halt within days, oil prices have surged to their highest level in over two years. Rystad Energy analyst Jorge Leon commented that the current situation poses a real risk to the global economy. If this situation persists for more than two weeks, the likelihood of a very significant impact on the energy system and the global macroeconomic outlook becomes much greater. If Gulf countries are unable to export oil, they will need to store it, and when storage capacity is exhausted, production will have to stop. It is "realistic" to expect oil prices to exceed $100 per barrel, but the crucial factor is how long prices remain at this level. At that point, governments worldwide would likely release their oil reserves, similar to what happened after the Russia-Ukraine conflict. Quilter investment strategist Lindsay James stated that a prolonged halt of all oil and gas production in the Gulf region is an extreme scenario. Market movements suggest that investors anticipate a swift resolution to the disruption of traffic through the Strait of Hormuz, but the risk of the conflict lasting longer than initially expected increases with each passing day. For households, the pressure will primarily manifest in energy prices rather than a broad inflationary shock. The greater economic risk stems from persistently high energy costs, which could severely drag down economic growth. (Jin10)