MONTGOMERY, Ala. (WSFA) – Iran has declared the Strait of Hormuz is now open to commercial vessels for the rest of the ceasefire with the U.S. in an announcement Friday.
President Trump said Friday that the U.S. blockade of Iranian ports will stay in place until the two sides reach a peace deal.
While the Strait of Hormuz is halfway across the globe, it still plays a role in the price of gas seen at pumps around Alabama.
“What we as economists are doing and what people that are trading in markets are trying to do is reading the tea leaves the same as everyone else,” said Dr. James Francisco, chair of the Department of Economics at Auburn University at Montgomery.
Dr. Francisco says the Strait of Hormuz plays a big role in setting the global price for oil and gas since it is used every day for transporting materials around the world.
“Anything that’s going to put that kind of supply pressure, potentially eliminating between one-fifth and one-third of those critical resources or delaying their implementation in supply chains is going to have upward pressure on that across the world,” he said.
According to Dr. Francisco, the United States, unlike some other countries, is not as reliant on the Strait of Hormuz.
“We are seeing record levels of production, not only production domestically, but domestic refining,” he said. “That means that the transport costs of the refined petroleum will be lower than it will be in other parts of the world. So, we have seen an increase in prices at the pump here in the United States, but it’s less than in Europe that is more dependent on the Strait of Hormuz region.”
However, relief may be on the way soon.
“What the market is forecasting is that we may have, and we hopefully have peaked in the price of oil and the price of natural gas, globally, and also the price of certain types of fertilizers that go into the growing of crops,” said Dr. Francisco.
Iran said Friday afternoon they will ‘take the necessary measures’ if the U.S. does not lift its blockade on Iranian ports.
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