Oil volatility spikes amid Middle East tensions

The Strait of Hormuz is a critical chokepoint, with approximately 20% of the world's daily oil supply passing through it. The recent blockade has significantly reduced shipping traffic, with some reports indicating a reduction of nearly 95% in the first week of March. Asian economies are particularly vulnerable due to their heavy reliance on imports through the Strait. Japan, for example, relies on the strait for 80-90% of its oil consumption. South Korea also faces acute vulnerability due to concentrated dependency and limited reserve capacity. Some analysts predict that a prolonged blockade could push oil prices to $130 per barrel, potentially matching the 2007-2008 oil shock. Extreme scenarios could even see prices as high as $300 per barrel. Higher energy prices would likely increase production expenses for companies, with those costs passed on to consumers, creating severe inflationary effects. The U.S. Treasury Department has responded by issuing a license permitting India to purchase Russian oil loaded on tankers at sea within a 30-day period in an effort to stabilize supply chains. G7 finance ministers have also stated they are ready to take necessary measures to support the global energy supply, including the coordinated release of stockpiles.