Joe Wallace

One might now expect 2 million barrels a day of Iranian oil exports to be taken off the market.

Almost all of that oil goes to China, but it's such a large amount of oil that in a global market, the effects would be felt internationally.

China, you would expect, would then join an already heated competition for scarce supplies from the US and Europe to replace at least some of those Iranian barrels, which could drive prices even higher.

The other possibility is that

Iran could seek to retaliate, for example, by encouraging its allies in Yemen, the Houthi rebels, to make it more difficult for Saudi Arabia to export oil from the Red Sea on Saudi Arabia's western coast.

Even if the Strait of Hormuz were magically to reopen tomorrow, it would be a logistical nightmare to get all the ships back in the right place and get the oil flowing at pre-war rates, let alone restarting all the production that's come offline.

If you look at the widely followed futures, however, there does still seem to be an expectation that this will all be over in a kind of rolling two-week window, almost matching the president's own rolling two-week windows.

So energy traders on Wall Street still seem to think this might wrap up sooner.

The biggest change, if you're comparing the present day with the 1970s, when they were the mother of all oil shocks, following the Arab oil embargo that started in 1973, and then, ironically, the Islamic revolution in 2000.

Iran is that the world economy and in particular, the US economy has become much less dependent on oil, not just because of changes in the makeup of the economy and the decline of some fuel heavy industries and the growth of others that aren't so energy intensive, but also because of changes that followed those crises in the 1970s.

If you think back to the classic post-war American cars, they were gas guzzlers and those just vanished after the oil shocks.

And also the world built up some really important buffers.

The members of the International Energy Agency, which include the US, are required to hold a certain number of days of exports in reserve to release when the time comes if there's a big shock to supply.

Even if the Strait does reopen, it's not like flicking a switch, kick-starting all of that

infrastructure will take time and be expensive and in some cases the oil fields may never return to their pre-war production rates governments that released oil from their reserves will at some point need to to replenish them and the market knows that and so you might expect higher prices for longer because there's going to be that demand in the market from government so

If you take that as your starting point, higher oil and gas prices for longer, that effectively acts as a tax on consumers.

There are also interactions with the other vulnerabilities in the economy.

So, for example, do high energy prices lead to more defaults by vulnerable borrowers from the private credit industry?

And does that lead to some blow up in the financial system?

How does this affect the incredibly energy intensive AI industry, which has been such a motor for growth, but also has led to concerns about a financial bubble?