Illustration: Chen Xia/GT
At a time when the global economy and trade are facing mounting uncertainties, the recent US move to inflame tensions in the Middle East seems to be steering the world economy toward an even more precarious situation. Whether through its protectionist policies or military actions against Iran, the US has emerged as the biggest source of uncertainty that has repeatedly plunged the global economy into turmoil.
IMF Managing Director Kristalina Georgieva warned in an interview with Bloomberg TV on Monday that the US strikes on Iran could potentially have broader impacts beyond energy channels, as global uncertainty escalates.
“We are looking at this as another source of uncertainty in what has been a highly uncertain environment,” she said, noting that “there could be secondary and tertiary impacts.”
Her warning undoubtedly sounds the alarm, highlighting the urgent need for vigilance in light of the complex international economic landscape, which is grappling with triple shocks in energy, finance, and supply chains.
The immediate shockwaves are clearest in energy markets. With escalating tensions in the Middle East as result of the US strikes on Iran, the Strait of Hormuz, one of the most important trade routes for crude oil in the world, is facing the risk of being blocked. Some 20 million barrels per day of crude oil, or 20 percent of global consumption, flowed through the strait in 2024, CNBC reported, citing data from the Energy Information Administration.
Oil prices jumped on Monday to their highest since January as the weekend US move stoked supply concerns, Reuters reported. Goldman Sachs said in a note dated Sunday that Brent crude could briefly peak at $110 per barrel if oil flows through the critical waterway were halved for a month and remained down by 10 percent for the following 11 months.
Moreover, the sharp increase in oil prices could not only elevate the operating costs for energy-intensive industries like aviation and chemicals but also ripple through the supply chain. Consequently, imported inflation pressures experienced by countries worldwide could intensify, further hindering global economic growth.
Also, the repercussions on the global financial and trade sectors are even more profound.
For instance, the US Dollar Index surged on Monday, at one point reaching 99.42, up 0.66 percent, reflecting investor flight to traditional safe-haven assets. The capital flight into such safe-haven assets could cause severe turbulence in financial markets, leading to another round of capital outflows and currency depreciation for some vulnerable economies.
Against this backdrop, some Western public commentators are hyping the so-called risk of the potential blockade of the Strait of Hormuz to China’s energy security, in an attempt to exert pressure on China. But the Chinese economy has been actively preparing for various risks this year.
In terms of oil reserves, China has continuously improved its strategic petroleum reserve system, promoted a diversified distribution of energy imports, and accelerated the development of the new-energy industry. These measures have provided a solid foundation for coping with potential energy supply fluctuations. China has the ability and preparedness to address its own energy issues and ensure the smooth and orderly operation of its economy.
By comparison, the US looks increasingly like a source of global economic instability. Washington’s domestic and foreign policies, as well as its strikes on Iran, fully attest to this. These issues are essentially an extension of its hegemonic and unilateralist policies.
Motivated by its own geopolitical and economic interests, Washington frequently takes unilateral actions in international affairs, disregarding international rules and the interests of other countries.
This policy priority not only disrupts the stable order of the global economy but also intensifies uncertainties in the international financial markets by eroding investor confidence, disrupting the global trade order, and escalating trade frictions and disputes among countries. More seriously, it seems unlikely that the US will change its approach, which is exactly what the world needs to guard against most.
Faced with such a complex international situation, all countries and regions are advised to remain vigilant and take proactive measures against US trade protectionism and its actions of deliberately creating chaos to profit from it.