The Iranian conflict has already reshaped the global economic landscape. Before hostilities erupted, numerous forecasting agencies had projected that oil prices would hover around $50 per barrel. Now, prices are approaching $97—and a further surge to $120 is not out of the question. Reaching that elevated level would require a military escalation, the closure of the Strait of Hormuz, and disruptions to alternative export routes.

Geopolitical tensions are already teetering on the brink of escalation, with the U.S. and Iran engaging in tit-for-tat attacks on oil tankers. Washington is tightening its blockade, while Tehran seeks to break it and reclaim control over the Strait of Hormuz as a key bargaining chip. These clashing objectives could transform economic pressure into a full-blown military confrontation.

Based on observed vessel counts, the Strait of Hormuz appears to have largely shut down. However, the actual flow of oil tells a different story, as millions of barrels continue to transit the strait daily. According to trader estimates, 7 to 8 million barrels per day moved through the waterway in late August, often undetected. Iran may attempt to halt this flow, and the brewing tanker war possibly reflects that intent.

Currently, four alternative routes handle most of the oil shipments bypassing the Strait of Hormuz: Saudi Arabia's east-west pipeline, the UAE's Port of Fujairah, several Omani ports, and the Iraq-Turkey pipeline. These routes are facing mounting pressure. Houthi attacks have already impacted Saudi exports, while Iran has threatened to extend restrictions beyond the Strait of Hormuz.

The Iranian conflict has delivered a significant oil shock to the global economy. Although a temporary lull in hostilities kept crude prices below $90 per barrel for most of the summer, the inflationary effects persist. Any renewed escalation would exert fresh pressure on consumer prices, prompting central banks to raise interest rates.