Economist: The impact of the Strait of Hormuz closure is about to crush demand

Golden Finance News reported that on April 25, the oil shock in the Strait of Hormuz has not yet caused a demand collapse, because wealthy countries are drawing on inventories and paying high prices to secure supply. But traders are now issuing a warning: a severe demand contraction is about to arrive. Traders said that the longer the Strait of Hormuz remains closed, the more consumption will need to be adjusted downward in order to be able to match supply that is at least down 10%. To achieve that, people will have to cut back on purchases—either by facing prices they can’t afford or by having governments step in with forced intervention to suppress consumption. Saad Rahim, Chief Economist at Tok Group, said that demand destruction is taking place in those non-obvious pricing centers. This contraction is already happening, but if it continues, the magnitude of the demand contraction will only grow larger. We are at a critical turning point. (Dongxin News Agency)