Trump’s war with Iran could see fuel rationing and global recession within months, experts warn

A global recession and widespread fuel rationing are likely if conflicts in the Middle East end any time soon, a leading economic agency has warned, ahead of a meeting of international allies to find a way to end the blockade of the Strait of Hormuz.

The latest research from Oxford Economics shows that the number of tankers passing through the Bosphorus has already decreased by 98 percent and if the main shipping route remains closed for an extended period, existing oil stocks will be permanently depleted and the current 2 million barrels per day oil deficit will increase sharply.

This would mean a 12 percent reduction in normal oil consumption worldwide, requiring fuel rationing and dealing a major blow to world economic growth this year.

“In our protracted Iran war scenario, we estimate the deficit will widen to around 13 million barrels per day by month six,” said Bridget Payne, head of oil and gas forecasting.

“This represents an unprecedented shortage of approximately 12 percent of consumption, leading to widespread rationing concentrated in developing economies, causing disruptions to activities and supply chains.

“Our modeling shows that this scenario would trigger a global recession and slow world GDP growth to 1.4 percent in 2026.”

Oxford’s research shows that the need for rationing will accelerate starting from the fourth month, and that the USA and Canada are among the countries most protected from this due to both their large domestic oil production and refining capacities.

The report notes that Europe, with better refined and stronger government policy, occupies a middle ground but “will remain exposed if the disruption is prolonged.”

“Emerging economies in Asia Pacific and Sub-Saharan Africa are most at risk, combining heavy import dependence with limited stock coverage and, in many cases, weak fiscal and institutional capacity to manage shortages,” the report adds.

There are concerns that Bangladesh could be the first country to run out of fuel. Drivers are seen queuing for hours to fill their tanks, while universities are closed as the country tries to preserve its dwindling reserves.

Elsewhere, numerous countries have taken proactive steps to protect their supplies.

Egypt ordered shops and restaurants to close early to save energy consumption, Pakistan introduced a four-day work week, the Philippines ordered the government to reduce fuel consumption, and Myanmar introduced alternative driving days.

Oxford also reported that “panic buying and black market for LPG” (Liquefied Petroleum Gas) had emerged in India and gas stations were empty in Thailand.

It came as Secretary of State Yvette Cooper hosted talks with a coalition of countries to reopen the crucial Strait of Hormuz shipping lane.

Meanwhile, the International Monetary Fund (IMF) has warned that the British economy is “particularly exposed” to rising prices due to its dependence on gas-fired energy; The cut in fertilizer supplies is also contributing to food price inflation, which is expected to rise by nearly 10 percent later this year.

Keir Starmer has warned the public that price rises are “inevitable” this year due to conflict in the Middle East, but the government has repeatedly said there is no call for fuel rationing at this stage – although they continue to monitor matters “hour by hour”.

Mr Starmer also confirmed that a virtual meeting of more than 30 countries, excluding the US, will be held on Thursday to find a solution to reopening the Strait of Hormuz.

Earlier in March, a former BP chief who served as an adviser to Gordon Brown during his premiership said the UK should be prepared for fuel shortages and called on the government to take stock of the situation to secure “critical sectors”. [like] health care, food supply, hospitals” were provided in abundance.

On Wednesday night, Donald Trump made additional comments that the war would end in weeks rather than months, but Ryan Sweet, chief global economist at Oxford Economics, said in response that “the military timeline is different from the economic one.”

“The Strait of Hormuz is still effectively closed and the base case assumes this will not change until the end of April, resulting in additional oil supplies disappearing from the market and economic costs increasing day by day.”

The company estimates that the average price of Brent crude oil will be around $113 in the April-June period. It was at $109 Thursday morning.

“Governments have had to scramble to limit the impact on companies and consumers as energy becomes increasingly rationed,” said Susannah Streeter, chief investment strategist at Wealth Club.

“The UK government has postponed announcing short-term support to segments of society that will be most affected by the increase in energy bills, and no specific aid is expected until the autumn. At this stage, while the government is still considering how to ease the pain of the energy shock, gradual increases in fuel duty could be made as planned from September.

“The biggest concern will be further damage to energy facilities in the Gulf. Repairs are already expected to take years, and further destruction will keep oil and gas prices high for even longer. Brent crude has jumped sharply to reflect these concerns, and European and UK gas futures have also jumped and are set to remain highly volatile.”

“About a fifth of global LNG supplies are typically transported through the Strait of Hormuz, but the strait remains largely impassable and, with a lack of planning becoming increasingly apparent, it is becoming clear that there will be no easy way out of this war.”

Meanwhile, a new report from the Office for National Statistics (ONS) has also highlighted British businesses’ concerns about energy costs in the second half of the year.

More than half (55 percent) of businesses expressed some level of concern about energy prices; this proportion increased to almost three-quarters (74 percent) in businesses with 10 or more employees. Additionally, almost two-fifths (37 percent) of companies with more than 10 employees said they were concerned about international conflicts affecting their supply chains in the coming year.

The questions were put to businesses in March, following the outbreak of conflict in the Middle East.