The Middle East crisis will fuel a surge in US inflation to 4.2 per cent this year, the highest in the G7, according to an OECD forecast that highlights the cost of the US-Israeli war with Iran.
The Paris-based organisation predicted that energy price rises would sharply increase inflation around the world, with “significant downside risks” to growth if disruptions to energy exports worsened. While the OECD expects US inflation to jump from 2.6 per cent in 2025, countries including China, South Korea and India also face a sharp increase in price growth because of the energy shock.
“The breadth and duration of the conflict are very uncertain, but a prolonged period of higher energy prices will add markedly to business costs and raise consumer price inflation, with adverse consequences for growth,” the organisation predicted in its interim economic outlook.
“There are very real, physical manifestations of the closure of the Strait of Hormuz that are working their way around the world and through the system that I don’t think are fully priced in,” Chevron CEO Mike Wirth said.
The industry stands to benefit from the crisis in some ways. U.S. crude prices have shot up to about $90 a barrel from near $65 prewar, ensuring at least a temporary windfall in the billions of dollars. Exporters of liquefied natural gas are getting higher prices for cargoes sold on the spot market, and previous fears that a glut of LNG would hurt their prospects have all but receded.
Still, executives fear that pinched consumers around the world will consume less of their product. Even if the U.S. manages to reopen the Strait of Hormuz, they said, it will take a long time for supplies of oil, fuel, plastics, natural gas and industrial gases—all critical to the global energy system and manufacturing myriad daily essentials—to catch up with demand.
Read: More inflation.
Meanwhile, US commanders are leaking to the Press that military facilities in the mid east, representing trillions of dollars in taxpayer funds, have been decimated by Iranian strikes.
Many of the 13 military bases in the region used by American troops are all but uninhabitable, with the ones in Kuwait, which is next door to Iran, suffering perhaps the most damage. Six U.S. service members were killed in a strike on Port Shuaiba that destroyed an Army tactical operations center. Iranian drones and missiles also targeted Ali Al Salem Air Base, damaging aircraft structures and injuring personnel, and Camp Buehring, damaging maintenance and fuel facilities.
In Qatar, Iran struck Al Udeid Air Base, the regional air headquarters of U.S. Central Command, damaging an early-warning radar system. In Bahrain, a one-way Iranian attack drone struck communications equipment at the headquarters of the U.S. Fifth Fleet. At Prince Sultan Air Base in Saudi Arabia, Iranian missiles and drones damaged communications equipment and several refueling tankers.
An Iranian-backed militia in Iraq launched a drone swarm attack on an upscale hotel in Erbil early in the war.
Iranian officials have even accused the U.S. military of using civilians as human shields by putting American troops in hotels.
“Iranian officials have even accused the U.S. military of using civilians as human shields by putting American troops in hotels.”
Maybe some of the hotels’ staff are still there for the troops, but if they know what’s good for them, they’ll bug out ASAP.
As for using civilians as human shields, I don’t put anything past (below) Trump or Hegseth.
Fink is either a fool or he’s playing head games with his investors.
Oil can’t go as low as $40/bbl next year because China sets the floor for oil prices. Once the prices get below a certain level, China buys more to continue filling its gargantuan strategic petroleum reserve. They’re also ignoring restoring the supply of LNG (used for power plants and feedstock), which takes longer to restore than crude oil.
Also, pumping more money into Silicon Valley AI can’t address the fact that China’s AI tech is more cost-effective (and more computationally efficient), and US AI companies will just have to charge more to get the investors’ money back. Bear in mind that people/companies don’t buy the most advanced technology that exists, but the most cost-effective for their budgets (e.g., why we use copper wires even though gold is a better conductor).