As the war enters its fourth week, the Strait of Hormuz remains under sustained threat, with shipping and insurance costs rising. Steve Hanke, Professor of Applied Economics at Johns Hopkins University, warns that oil prices are heading beyond $100 per barrel. Speaking to India Today, Hanke states he is ‘long oil’ and expects prices to rise due to Iranian control of the Strait. He explains that elevated logistics costs will increase the relative price of oil and its derivatives like chemicals and fertilizers, but won’t necessarily cause overall inflation if central banks don’t increase money supply. Hanke reveals that Iran’s oil exports have actually increased since the war began, with higher revenues strengthening the Iranian rial by 6% against the US dollar. However, other Gulf nations like Kuwait, Saudi Arabia, UAE and Qatar face reduced revenues as the Strait remains effectively closed to them. He warns that the disruption of petrodollar recycling could create global liquidity problems, noting that the physical oil price in India and Southeast Asia is already higher than futures market prices.
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