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Dallas Fed Sees Hit to Global GDP if Hormuz Stays Shut
Halt Through June Would Lower GDP by 2.9 Percentage Points in Q2
A halt in Strait of Hormuz oil shipments that persists through June due to the Iran war would reduce global economic growth by an annualized 2.9 percentage points in the second quarter,Ìýaccording toÌýthe Federal Reserve Bank of Dallas.Ìý
About one-fifth of the world’s oil passes through the Strait of Hormuz, which has been essentially closed as a result of the war. That has caused the price of West Texas Intermediate oil to surpass $97 a barrel.
The regional Fed bank’s researchers modeled the potential economic impact if the maritime chokepoint is shut to shipping traffic for various durations. If the strait reopens after one quarter, they expect the price of oil would drop to $68 per barrel in the July-to-September period while GDP growth would increase 2.2 percentage points.
A shutdown that extends to two quarters would cause oil to climb to $115 in the third quarter before falling back to $76 in final three months of the year. A three-quarter closure could drive up oil as high as $132 by year-end, the researchers said.
Economists are monitoring both the inflationary and demand impacts from soaring prices of gasoline, diesel and other petroleum products.Ìý
Rising gasoline prices are already leading to less spending in other categories, some economists say.ÌýAmericans are searchingÌýfor ways to mitigate higher fuel costs, including traveling less and waiting in line to save a few cents at the gas pump.
The average price for a gallon of diesel in the U.S. blew pastÌý$5 this weekÌýfor only the second time in history,Ìýaffecting the economyÌýbecause diesel powers almost every industry.
