Inflation 'disaster' looms if Iran's leaders sign off on response to US strikes

The world could soon be braced for an inflation “disaster” after Iran’s parliament approved closing the key Strait of Hormuz. A whopping 20 percent of globaloil and gas goes through the strait and its closure could create the same kind of inflationary shocks that the world felt after Russia invaded Ukraine in 2022.

The decision is not final and is now with the Supreme Leader Ayatollah Ali Khamenei and the country’s Supreme National Security Council, according to Iranian state TV.. It comes after a surprise attack on three of the country’s nuclear sites by the US.

The move, according to Revolutionary Guards Commander Esmail Kosari “will be done whenever necessary”. He said to the Young Journalist Club: “Our hands are wide open when it comes to punishing the enemy, and the military response was only part of our overall response.”

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The impact of the strait closing would be “catastrophic” according to business expert Gerrit Heinemann, who spoke to the german news outlet BILD. “[It would be] worse than Corona and Putin combined! The second episode of the ongoing crisis would be even more severe than what we experienced at the beginning of the Ukraine war and during the Corona years. A disaster.”

He continued: “A large part of the global supply chains runs through the affected region. This not only dramatically impacts energy supplies, but also the flow of goods. All of a sudden, all the crises we had just overcome would return: the energy crisis, inflation, disrupted supply chains, and now the threat of mass unemployment.”

The strait separates Iran and Oman and is only 21 miles across. As a result it is vulnerable to attacks.

There has already been an impact on oil prices following the outbreak of war between Iran and Israel, climbing by 21% in the financial markets over the past month.

The Trump administration has signalled a willingness to renew talks with Iran and avoid a prolonged war in the aftermath of its strikes on Iran, known as Operation Midnight Hammer. Defence secretary Pete Hegseth said at a news conference that America “does not seek war” with Iran while vice president JD Vance said the strikes have given Tehran the possibility of returning to negotiate with Washington.

Much of the world is absorbing the consequences of the strikes and the risk that they could lead to more fighting across the Middle East after the US inserted itself into the war between Israel and Iran. Air strikes starting on June 12 by Israel that targeted Iran’s nuclear facilities and generals prompted retaliation from Iran, creating a series of events that contributed to the US attack.

Prime minister Sir Keir Starmer said the UK was moving military equipment into the area to protect its interests, people and allies, but that he was focused on finding a solution.

While US officials urged caution and stressed that only nuclear sites were targeted by Washington, Iran criticised the actions as a violation of its sovereignty and international law. Iran’s foreign minister, Abbas Araghchi, said Washington was “fully responsible” for whatever actions Tehran may take in response.