The Iran War’s worldwide economic shock is going to worsen.
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SPOTLIGHT: Iran War’s Worldwide Economic Shock To Worsen
OIL PRICE’S UPS AND DOWNS WILL CRIMP GLOBAL TRADE
May 14 (King World News) – Gerald Celente: Ongoing volatility in the price of oil could shave 1.75 percent off the value of world trade by the end of next year, the private Global Trade Alert (GTA) research organization reported. The group analyzed trade volumes following previous shocks, including the COVID War and the Great Recession.
“We find that a sustained rise in fuel price volatility slows world trade growth,” GTA founder Simon Evenett said in a statement. “Effects take up to 19 months to materialize. The worst may be ahead of us” as nations’ oil on hand begins to run out, shipping routes are revised and contracts repriced, and consumers’ confidence and spending weaken.
In March, the World Trade Organization estimated that world trade would grow 1.9 percent this year and 2.6 percent in 2027. It has said that the oil price shock could slice 0.5 percent off this year’s growth rate.
“A world in which oil is expensive but stable is less damaging to trade than a world in which oil prices swing unpredictably,” the GTA analysis found. “What weakens goods trade is the volatility, not the price itself.”
The GTA’s worst-case scenario assumed oil prices rise 25 percent, roughly what happened after Russia invaded Ukraine in 2022. The study coupled that with a doubling in price volatility, which was the case as the Great Recession’s commodity crash played out through 2008.
If volatility does double, Africa and the Mideast would see their international trade decline by about 8 percentage points, the study forecasted. China’s would drop 3 percentage points and the U.S.’s 1 point.
Since the Iran War began, oil prices have bounced from the mid- to high $80s to as much as $126 a barrel. Prices fall on hints that peace is imminent, then go up when ships are attacked or hopes for a settlement are scuttled…
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WAR’S ECONOMIC DAMAGE TO WORSEN, MAERSK WARNS
AP Moller-Maersk, the world’s second largest ocean shipper, reported its costs have soared by $500 million a month because of the Iran War’s fuel price shock and closure of the Strait of Hormuz, requiring revised routes for some cargoes.
The company has hiked its freight rates to pass the increase to its customers, it said.
“The secondary impacts of this war” are likely to be “inflation, a possible reduction in demand,” CEO Vincent Clerc said in a Bloomberg interview. “There are question marks about how this is going to flow through the economy.”
Only 2 to 3 percent of the world’s goods shipments cross the Strait of Hormuz, he noted. As a result, the war’s direct impact on trade will be minimal. However, higher oil prices will take a toll on nation’s economies and consumers may be forced to cut their spending, he worries.
Maersk, which carries 20 percent of the world’s seaborne cargo, is seen as a leading indicator of global trade’s strength.
The company maintained its 2026 financial outlook and still expects demand for containers to rise by 2 to 4 percent. However, risks are to the downside, it added.
Maersk’s revenues were 2 percent smaller during the first quarter, year on year, and operating profit sank almost 75 percent to $340 million. It still foresees its full-year operating profit to fall somewhere between a $1.5-billion loss and a profit of $1 billion.
The company’s share price fell 7.6 percent last week.
U.S. DOLLAR HAS LOST GAINS MADE DURING IRAN WAR
When the Iran War began, the U.S. dollar – long seen as investors’ safest refuge during turbulent times – rose as much as 2.7 percent in value against an assortment of major global currencies, the U.S. Dollar Index showed.
At the close of trading on 7 May, it was up only 0.28 percent above its level the day before the war began.
What happened?
The dollar’s value was already fluctuating before the war began, The Wall Street Journal noted, due to Donald Trump’s erratic policies, including his tariff war and his attacks on the U.S. central bank’s independence.
Also, the U.S. Federal Reserve’s 2025 interest rate cuts and a rise in short positions against the greenback among hedge funds weakened the dollar’s outlook further.
When the war began, many investors dumped or scaled back their short positions, expecting the Fed to raise its interest rate to cope with the war’s energy price shock. Higher interest rates would make dollar-denominated investments more attractive.
However, growing optimism that both sides in the war are angling for a peace deal has partially erased the dollar’s gains, according to the WSJ. Also, central banks in Australia and Norway have raised their rates to head off energy price inflation, making those currencies more prospective for better returns.
TREND FORECAST:
The longer the Iran War lasts and the more damage it does to global economies the greater the hatred of the United States from nations who have suffered from the war’s socioeconomic consequences.
Therefore, while the dollar has gained strength because other currencies have fallen lower, we forecast that this is a temporary upward blip and the death of the dollar is on the near horizon… not only because of the Iran War damage, but the decline of the U.S. economy and its soaring debt levels.
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