The war in Iran is a seismic political event and — already — a humanitarian cataclysm. But it also has possibly enormous implications for the global economy. Beyond the fate of Iran’s stricken economic system, the most obvious near-term consequences involve the massive amounts of oil and natural gas that travel through the Strait of Hormuz, the crucial conduit between the Persian Gulf and the open ocean. The waterway is no stranger to geopolitical disruption, and for decades, Iran’s ability to hamper or even cripple shipping there has hung over any conflict with its regime. Now, Iran in its most vulnerable position since the 1979 revolution, shipping in the Strait is at a standstill, and nobody knows whether energy markets are in for a small shock or something much more drastic. To better understand what’s at stake, I spoke with Rory Johnston, a Canada-based oil market researcher who writes the popular, data-driven newsletter Commodity Context.

You wrote on Monday that the war is “thrusting the oil market into its most perilous situation since Russia’s invasion of Ukraine in 2022.” Global markets have now had a day to digest all this. What have you made of their reaction so far?So far, the market has reacted almost exactly as I pictured it would, which doesn’t always happen. I think a lot of people have been surprised that the price explosion hasn’t been larger. The reason is that, coming out of the weekend, people were very bullish on prices rising. I think everyone could see that the largest accumulation of military hardware since the invasion of Iraq had been built up in the Gulf. Everyone knew where this was going.

My estimate is we already had factored in about a $7 a barrel “Iran premium” on oil prices. Add another seven, eight bucks on Monday, and that brought us to about $80 for the global benchmark Brent Crude. But if this crisis continues, that’s not going to be enough. Really, the question right now is duration. We don’t see tankers traveling through the Strait of Hormuz. For how long? So far, the Strait has not been formally closed. The Revolutionary Guard Corps declared it closed, and then Iran’s foreign minister said Iran had no intention of closing it. So it’s........

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