Gulf Cooperation Council (GCC) economies are sliding into their worst economic crisis since the pandemic, with several expected to contract this year on spillovers from the U.S.-Israel war with Iran right on its doorstep, Reuters reported. The war's knock-on effects have ripped through the energy market – the Gulf economies' lifeline – driving oil prices sharply higher and triggering a historic supply shock, drawing comparisons to the 1970s.
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Even if the Strait of Hormuz opens again, energy executives and analysts say the industry will no longer be able to count on it as it used to. For the strait, there is no going back to normal, the New York Times reported. Countries across the region are exploring building, expanding or rehabilitating infrastructure that would bypass the strait. And nations that import fuel from the region are racing to secure oil and gas from elsewhere, putting conservation measures in place and turning to alternatives like coal. Those strategies are likely to shift over time.
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The Middle East crisis and prolonged U.S. interest rate hikes are squeezing Korea's construction sector, triggering massive job cuts at major companies and a surge in bankruptcies among smaller contractors, The Korea Times reported. Cost pressures have deepened due to the conflict in the Middle East, which has caused severe supply disruptions of naphtha, a key petrochemical feedstock, heightening the financial strain on builders. The broader economic downturn is driving the industry to downsize rapidly.
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OPEC on Monday lowered its forecast for world oil demand in the second quarter by 500,000 barrels per day, the producer group's monthly oil report showed in its first public assessment of the Iran war's impact on the market, Reuters reported. OPEC sees a smaller hit to oil demand from the war this year than some other forecasters, such as the U.S. government's Energy Information Administration nL6N40Q0XR. OPEC also made no change to its full-year outlook as it sees consumption rebounding in later months.
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For a glimpse of how much higher energy prices could still soar, look beyond the prices Wall Street analysts normally track for West Texas Intermediate in the U.S. and Brent in Europe, the Wall Street Journal reported. At the center of the supply squeeze in the Middle East, traders are paying an eye-watering $160 a barrel for the Emirati oil that can dodge the Strait of Hormuz, far above those global benchmarks. Those sky-high prices, traders say, are a harbinger of where the rest of the market could be heading if the Persian Gulf isn’t reopened soon.
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