Iran War has Made ‘Whole World Poorer’ Says New Zealand Finance Minister

New Zealand Finance Minister Nicola Willis said finance chiefs gathered in Washington are increasingly uneasy about the lack of clarity over what comes next in the Middle East — and how countries should prepare.

“There is really a shared concern across nations that when the global oil market is disrupted in this way, it has inflationary impacts for our consumers, growth impacts for our countries,”  Willis said in a television interview with Bloomberg Businessweek Daily’s Carol Massar and Tim Stenovec. “Frankly, it has made the whole world poorer than it would otherwise be.” As the clock runs down on a two-week ceasefire agreed between the US and Iran, the key question is whether they can reach an accord to end a war that has killed thousands of people and sparked a global energy crunch.

While talks in Pakistan concluded without a deal, the two sides are considering extending their truce by another fortnight to allow more time to negotiate a peace agreement, according to a person familiar with the matter.

The current ceasefire has largely held since it began on April 8. But there are some major pressure points that could test its durability and stand in the way of a longer-lasting solution. Here are some of the hurdles to permanently resolving the conflict.

The Strait of Hormuz

After the war began, Iran choked off access to this crucial waterway that normally handles around a fifth of the world’s oil and liquefied natural gas supply, sending energy prices soaring. It continued to move its own crude exports through Hormuz and only allowed certain other vessels to cross the strait, often after talks for safe passage and sometimes after requesting payments of as much as $2 million.

As daily traffic remained severely constrained in spite of the ceasefire, and after the failure of talks in Pakistan, the US implemented a blockade of ships that have called at or are heading to Iranian ports. This is designed to curb Iran’s oil exports and apply economic pressure on the regime in Tehran to reopen the Strait of Hormuz as a toll-free zone for all vessels. The strategy could backfire as the blockade risks further reducing what was already a trickle of ships passing through Hormuz. Iran has also threatened to retaliate by disrupting shipping in the Red Sea — a route that’s been a vital alternative to Hormuz for Saudi Arabia to keep exporting its oil.

Iran is unlikely to give up its leverage over the Strait of Hormuz — and by extension the global economy — easily or without significant concessions from the US. It has endured extended periods of low oil exports before, including during President Donald Trump’s first term, when he pursued a “maximum pressure” strategy of harsh sanctions.

Even if the blockade forces Iran to relent, it will take time for Hormuz crossings to resume in earnest. Shipowners will need to be convinced that their crews and vessels can transit safely without being targeted by missiles, drones or sea mines. A large backlog of ships has also accumulated on both sides of the strait

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