The escalation of the Iran war and its regional expansion risk triggering a major economic shock, and Romanian companies must prepare for extreme volatility and develop resilience strategies, warn experts from the consulting company Frames, in an analysis regarding the possible economic effects of the Middle East crisis.

According to the cited source, Iran’s geographical position and its influence on energy markets make this region a nerve center for the global economy. An escalation of tensions would instantly reverberate through financial markets, affecting everything from the price of fuel at the pump to the cost of consumer goods.

The “heart of the economic problem” in the event of an Iranian conflict is the Strait of Hormuz, the analysis shows. This narrow sea channel connects the Persian Gulf to the Indian Ocean and represents the most important energy transit point in the world. Approximately one-fifth of global oil consumption passes through this area daily. Iran controls the northern coast of the strait and has repeatedly threatened to block it in the event of conflict.

“A closure, even temporary, of this corridor would paralyze the markets. Oil ships would remain blocked, and alternative routes through land pipelines do not have the capacity to take on such a large volume of crude oil,” Frames manager Adrian Negrescu said, according to Agerpres.

The impact on commodity markets would be immediate and brutal. Beyond the significant declines announced on Monday on international stock exchanges, a significant shock will be felt, in the medium term, in the area of ​​natural resources. Traders would react to the mere threat of a conflict, and prices would reflect the panic of the markets.

In a moderate scenario, in which the conflict is limited and transit through the Strait of Hormuz is only partially affected, Brent oil prices could quickly exceed the threshold of 80-85 dollars per barrel. This increase would be supported by investor fear and speculation.

In the pessimistic scenario, marked by a large-scale war and a total blockade of the strait, the consequences would be catastrophic. Frames analysts estimate that the price could reach record levels, ranging between 100 and 120 dollars per barrel.

“Such an explosion in prices would trigger a global inflationary wave, forcing central banks to maintain or raise interest rates, which could throw the world economy into a deep recession,” warn the study’s authors.

Also, despite the fact that oil dominates the headlines, the natural gas market would suffer an equally hard blow. Qatar is one of the world’s largest exporters of liquefied natural gas (LNG). The only sea route for its exports is the Strait of Hormuz. A blockade would cut off Europe and Asia’s access to a vital energy source.

“Prices on European gas exchanges would explode instantly, reminiscent of the energy crisis of past years. Countries dependent on imports would be forced to rationalize industrial consumption to protect reserves for the population. We, in Romania, would also be directly affected, because we import significant quantities of gas. A higher price at international level would quickly lead to price increases,” says Negrescu.

Beyond energy, a conflict would seriously disrupt global maritime cargo transport, generating a domino effect on all industries. According to experts at Frames, the maritime insurance market is an extremely sensitive barometer of geopolitical risk. During times of conflict, ships transiting areas considered dangerous must pay “War Risk Premiums” (WRP). These are additional insurances, mandatory to cover potential damages caused by acts of war, terrorism or piracy.

“Before the escalation of the conflict, the risk premium for transiting the Red Sea and the Strait of Hormuz was negligible, representing only a fraction of a percent of the value of the ship. In the current context, these premiums have exploded, reaching significant percentages of the value of the ship (for example, from 0.01% to 1% or even more). For a large container ship, the value of which can exceed $ 100 million, this means an additional cost of hundreds of thousands of dollars for a single passage,” the analysis shows.

In addition, experts say, the detour through southern Africa adds 10 to 14 days to the travel time from Asia to Europe, and delays in deliveries would disrupt global supply chains. Factories in Europe or North America could run out of vital components (from chips to car parts), which would lead to production shutdowns. Retailers could be left with empty shelves, and this lack of products in the face of constant demand inevitably leads to higher prices.

According to experts, Romanian companies must prepare for extreme volatility and develop resilience strategies. The first scenario targets industries dependent on transport and energy. Logistics companies, car manufacturers and retailers would face a severe contraction in profit margins. Production costs would increase, and the ability to transfer these costs to consumers would be limited by the decline in purchasing power. These businesses urgently need to rethink their supply chains, moving production closer to markets, a process known as nearshoring.

The second scenario brings opportunities in the energy sector to the fore. Companies that extract oil and gas in safe areas, such as the United States or the North Sea, would see record profits in the short term.

“The war in Iran and the instability in the region represent not only a geopolitical crisis, but also a major economic shock,” Negrescu warned.

The combination of huge risk premiums, costly diversions of transport routes, rising energy prices and disruption of supply chains creates a favorable environment for a new increase in global inflation, according to experts.

Central banks, which had only just begun to control post-pandemic inflation, could face a new major challenge, being forced to maintain high interest rates, which could further slow down global economic growth, the analysis by the consulting firm Frames also shows.