Tightened sanctions by the West haven’t persuaded Iran into giving up its controversial nuclear program but have triggered an oil price spike that could lead towards a global recession, according to a report by Reuters.
New sanctions by the U.S. and EU against Iran have stirred up tensions and a risk of hostilities, including a military attack by Israel on Iranian nuclear facilities. The report pointed to the recent forewarnings by US President Barack Obama and IMF chief Christine Lagarde that tensions over Iran could increase oil prices and lead to an “economic shock”.According to the report, after the EU’s January decision to ban the imports of the Iranian crude, figures in March showed that the eurozone has slid into greater recession with the private sector activity, signifying an unforseen sharp drop according to Markit research firm’s purchasing managers’ index (PMI).
Chinese manufacturing activity also fell, according HSBC bank’s preliminary Purchasing Managers’ Index (PMI), adding to concerns about recession in the world’s second largest economy.
The IEA estimates that exports from Iran could plunge by about 800,000 barrels per day to one million bpd in the second half of the year after the tighter Western sanctions go into force.
Since the end of 2011, global crude prices have risen by 20 percent, and if Iran, as the world’s third oil exporter, cuts its exports following the imposition of sanctions, or if Tehran threats become real of closing the Strait of Hormuz, one of the world’s key maritime routes, the crude prices will reach the peak aggravating the situation for the West’s struggling economies.