President Trump said that he would “obliterate” Iran’s electricity plants if it did not open the Strait of Hormuz within 48 hours. Iran dismissed the ultimatum as its missiles hit southern Israel, including near the country’s main nuclear research center.
So what makes this one worse?
Many of the hallmarks of the 1973 shock were a result of poor domestic policy decisions, and the hit to supply is far greater now, said Bob McNally, president of Rapidan Energy Group, a research firm. Policies like rationing set off panic buying, creating shortages instead of easing the problem.
The 1973 embargoed oil accounted for about 7 percent of global oil consumption, and targeted only a handful of nations. That meant the United States could still buy some oil from other countries.
Now, closer to 20 percent of the world’s supply is threatened, and the disruption is caused by a war that has no end in sight. The United States, Israel and Iran are all dug in, and daily threats to oil production, refining and storage mean that even when ships can sail again the supply might not come back quickly.
The conflict has the potential to cause a lasting inflationary cycle, as rising prices for everything from diesel to fertilizer are passed on. That could add pressure on a world economy that is already contending with President Trump’s trade war.