The war in Iran and the resulting closure of the Strait of Hormuz have immediate global economic effects. The strait is a narrow waterway through which about a fifth of the world’s oil and natural gas supplies normally pass. Virginia Tech economic expert David Bieri says the closure already has historic consequences for consumers.
Global oil markets reacted quickly. About a week after the war began, global crude prices spiked to nearly $120 a barrel. Prices then eased to around $100 a barrel, but that level is still up more than 40 percent from the pre-war level of $70 a barrel. As a result, gasoline and diesel costs rose in many countries.
Gasoline prices are averaging close to $4 per gallon, up nearly 80 cents from a month ago, while diesel is just under $5 per gallon, about $1.30 higher than last month. Bieri notes the impacts go beyond pump prices. Observers and officials will be watching oil flows, market prices and the choices that countries and companies make as they respond to the disruption.
Difficult words
- strait — a narrow waterway between two land areas
- supply — goods or fuel available for people or companiessupplies
- closure — the act of closing or stopping something
- result — to happen because of something elseresulting
- consumer — a person who buys or uses goodsconsumers
- spike — to increase suddenly to a much higher levelspiked
- ease — to become less strong, serious, or severeeased
- crude — oil in natural form, not yet refined
Tip: hover, focus or tap highlighted words in the article to see quick definitions while you read or listen.
Discussion questions
- How could higher gasoline and diesel prices affect your daily life and household budget?
- What actions could governments or companies take to respond to an oil supply disruption like this?
- Would you change your travel or shopping habits if fuel prices rose sharply? Why or why not?
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