Oil Shock: How the Israel-Iran Conflict Could Affect Kazakhstan

The latest flare-up in the Middle East has already shaken global markets, sending oil prices upward. Economist Ruslan Sultanov analyzed the potential consequences of the Iranian-Israeli conflict for Kazakhstan’s economy on his Telegram channel Tengenomika, Orda.kz reports.

According to Sultanov, escalating tensions in the region — especially with the possibility of direct U.S. involvement — are pushing the global economy closer to a critical tipping point.

The most immediate effect has been the rise in oil prices. At first glance, this might seem like good news for an oil-exporting country like Kazakhstan.

Still, Sultanov cautions that a so-called “oil shock” could actually trigger a global economic downturn.

Experts at Oxford Economics warn that in the worst-case scenario, oil could spike to $130 per barrel (JPMorgan offers a similar forecast), potentially cutting up to 0.8% of global GDP,he notes. 

A major concern is the potential partial or full closure of the Strait of Hormuz, a vital chokepoint in global energy transport and a key route controlled by Iran. Should the Strait be blocked, the resulting supply shortage would be severe.

The Strait of Hormuz is the ‘narrow neck’ of global energy: 20 million barrels of oil per day (a quarter of all seaborne oil), 35% of all LNG, and nearly all exports from the Persian Gulf pass through it. The strait is only 21 miles wide. A complete closure isn’t yet the base-case scenario for many strategists, but after the strikes on Iran, that likelihood has increased. According to Danske Bank analysts, such a move would constitute an unprecedented negative supply shock — at least in modern history,Sultanov explains. 

If oil prices soar, inflation in the United States could climb to 4–5%, setting off ripple effects across developing economies, including Kazakhstan.

The ongoing uncertainty could also spook investors into pulling out of Kazakh assets, reduce demand for the tenge, and increase government spending on debt servicing. Sectors like banking and construction could see falling share prices.

For now, most experts believe a total blockade of the Strait of Hormuz is unlikely.

Even the threat of such a move is enough to push up insurance costs and disrupt supply chains.

Sultanov notes that markets are still pricing in a short-lived conflict.

There’s been a lot of information noise lately — trade wars, a falling dollar, recession fears, inflation, and now war. Recently, it has intensified: U.S. strikes, an announcement of Russia being ready to supply nuclear weapons to Iran, and speculation about the strait’s closure. But stock market futures fell only about 0.5% at the open, and oil prices rose no more than 2%. This suggests the market isn’t expecting a drawn-out conflict. If the closure of the Strait of Hormuz were truly being priced in, oil would already be significantly higher. Objectively, the market still expects a short war,Sultanov concludes. 

Original Author: Nikita Drobny