About 14 huge tankers pass through Strait of Hormuz, a strategic shipping lane linking the Gulf of Oman with the Arabian Gulf, carrying about 15.5 million barrels of oil on an average day. This represents 35 percent of the world's seaborne oil shipments, and 20 percent of oil traded world-wide in 2011.
Iran's global share of oil is little over 4 million barrels per day or over 5 percent, which is almost 3 times the Libyan production. If there is a conflict in the Arabian Gulf then increase in oil prices will not be the same that we witnessed during the Libyan conflict, although the Arab Spring had pushed prices to a high of $127 plus. Though some of the oil analysts are of view that price could surge by another $50-$75 per barrel, I think the blockade of Hormuz could lead to a disaster for many world's smaller economies because prices will surly surge and if conflict prolongs, oil price will further surge.
Disruption will also affect most of the Middle Eastern countries, since a good part of trading activity in the Gulf region is carried via Strait of Hormuz. A majority of the Gulf countries exports oil and imports goods from across the world. So an overall impact on the regional trade will be profound.
Any military intervention will lead to a huge cost factor that will involve all the countries engaged directly, but it will also cause a severe impact on the global trade. Not only will any disturbance in the region initially push the oil prices higher, it will drag many other businesses that will lead to a rise in insurance cost of tankers and ships. Moreover, freight charges will make a big leap, all types of transportation (road transport, planes and railways) will become costlier and industrial and manufacturing business will also have to take a severe hit, which will ultimately push inflation higher.
Certainly, the world economies will have to face the terrible consequences. Imagine if some of the important Iranian installations are bombed and military intervention prolongs for a longer duration: the consequences could be catastrophic for the world economy and it may not be surprising if the oil prices hit $300 per barrel. Not only will the prices of oil, but of gold and other commodities', including food, will rise.
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