Iran Strait Closure Risks Economic Blindness Similar to Covid, Analyst Warns
9 reported
A Vox article argues that financial markets and the public are failing to price in the economic fallout from the ongoing closure of the Strait of Hormuz, drawing parallels to the early, underestimated stages of the Covid-19 pandemic. The author, who wrote a 2017 magazine cover story about pandemic risks, admits he was nonchalant about Covid in early 2020 and believes a similar cognitive bias is at work today. The article cites the International Energy Agency calling the disruption the largest in global oil market history, with supply down by more than 10 million barrels a day in March. It notes that the 1973 oil embargo removed 7 percent of global supply, while the Hormuz closure has cut supply by 13 percent. The piece reports downstream effects including a Mississippi corn farmer buying diesel "hand to mouth," fertilizer up 60 percent, fuel rationing in South Korea, Thailand, and Vietnam, and Lufthansa canceling 20,000 summer flights. Despite these signs, the S&P 500 hit a new all-time high in the same week the New York Times covered the crisis. The author makes a falsifiable prediction: if the Strait remains materially restricted through June, the S&P 500 will be at least 10 percent off its April 22 high by Labor Day.
What’s reported
The International Energy Agency calls the Strait of Hormuz closure the largest disruption in global oil market history, with supply down by more than 10 million barrels a day in March.
The 1973 oil embargo removed 7 percent of global supply; the Hormuz closure has cut supply by 13 percent.
A 73-year-old corn farmer in Como, Mississippi, told NPR he is buying diesel "hand to mouth" and fertilizer is up 60 percent.
The Philippines declared a state of national energy emergency; South Korea, Thailand, and Vietnam are rationing fuel.
Lufthansa has canceled 20,000 summer flights.
The S&P 500 hit a new all-time high in the same week the New York Times covered the crisis on its front page.
The author predicts: if the Strait of Hormuz remains materially restricted through June, the S&P 500 will be at least 10 percent off its April 22 high by Labor Day.
Princeton Policy Advisors has forecast a US recession beginning in May.
The IMF cut its global growth baseline from 3.3 percent to 3.1 percent, with an adverse scenario at 2.5 percent.
Key figures
Robert Meyer and Howard Kunreuther (Wharton economists, identified the ostrich paradox)
Daniel Gilbert (Harvard psychologist)
Rachit Dubey (UCLA, author of a 2025 Science paper)
Mark Dowding (chief investment officer at RBC BlueBay)
David Dayen (American Prospect analyst)
Princeton Policy Advisors (forecast US recession)
IMF (cut global growth projections)
Sources: vox.com
