With the Iran war continuing to escalate, the world is grappling with the closure of the busy sea traffic lane, the Strait of Hormuz.

You may feel that that is only a disruption that affects oil supply and its prices.

Many people think this is a straightforward relationship. But while oil supply and its prices are significantly impacted by the disruption, the impacts are not limited to that.

Let’s elaborate on the consequences.

First, the immediate impact is a shortage of oil supply, which triggers panic among people.

On one hand, there is a shortage of supply and, on the other, people try to stock more (known as panic buying) during a crisis time.

That creates double impacts on the supply chain – a shortage in supply and a surge in demand. Often, the supply chain cannot handle both sides’ tensions in this complex global environment. Hence, immediate impacts become visible in the form of rising prices.

The consequences........

© The New Daily