- Dallas Fed President Lorie Logan warned that global oil and gas consumption may need to fall if shipping through the Strait of Hormuz doesn't normalize soon.
- The conflict involving Iran, the U.S., and Israel has disrupted traffic through the key energy route, driving up prices for oil, food, and fertilizers.
- Global oil supply has dropped by about 13 million barrels a day since the war began, with inventories helping to fill the gap for now.
Lorie Logan's Warning
Federal Reserve Bank of Dallas President Lorie Logan cautioned that the world may have to curb its energy use if the Strait of Hormuz remains disrupted. "If the molecules aren't available, the world can't consume them," she said at a conference on Thursday, underscoring the severity of the situation.
Disruption and Impact
Before the war, about 20% of global oil and LNG supplies passed through the strait. The ongoing conflict has choked this flow, sending ripples through energy markets. Logan noted that U.S. oil production growth is expected to remain limited, exacerbating the supply crunch. Global oil supply has already dropped by roughly 13 million barrels a day since hostilities began, with inventories providing a temporary buffer.
Broader Economic Spillovers
The disruption has coincided with elevated prices for energy, food, and fertilizers, highlighting the wide-reaching economic impact. Without a resolution, the world may face tougher choices about energy consumption, Logan warned, as the market adjusts to tighter supplies.