Global oil prices surged above $110 / barrel after tensions in the Middle East disrupted shipping through the Strait of Hormuz, one of the world’s most critical oil transit routes. The sudden tension raises the fear in global market and make energy crisis. This increase the price of crude oil.
Why the Strait of Hormuz Is So Important
The Strait of Hormuz, located between Iran and Oman, connects the Persian Gulf to the Arabian Sea and is one of the most important route in shipping of crude oil. Roughly 20% of global oil and liquefied natural gas supplies pass through this area every day.
Because large amount of oil passes through this narrow water passage, So any disruption in this route impact global economy very strongly. Any tension in this route increases tension among traders and impact global oil price sharply.
Reason Of Hike In Oil
Due to geopolitical tension many ships cannot passes through strait of Hormuz and they are waiting for the for the opening and the end of this tension. Many ships cannot passes and the oil don’t reached tj many countries globally. This causes the shortage of oil at many countries. This increases fear, so the oil prices Hike.
What Happen Next
If this middle east tension rises and the strait Of Hormuz remain closed for ships this could make a sharp increase in oil prices globally. Oil will touch 150$/barrel if disruption rises.
This situation is very critical of developing countries as they mostly rely on imported oil. This could effect sharply the region of middle east. The result of this conflict appears in Pakistan as the petrol and diesel prices increases by Rs.55 in a single day which is the recorded high increase.
