War with Iran disrupting global supply chain

The strikes on Iran led by the United States and Israel are having major consequences on the global supply chain, as 20% of the world’s oil flows through the Iranian-controlled Strait of Hormuz.

Hitendra Chaturvedi, a professor of practice at the NASPO Department of Supply Chain Management at ASU, joined “Arizona Horizon” to discuss the lasting impacts of this conflict.

Americans are already paying 60 cents more per gallon of gasoline than last month, according to AAA. Chaturvedi explained that if this conflict continues, Americans can expect more than just rising gas prices.

“…the price of oil…$70, and now it is flirting with about $120,” Chaturvedi said, “…that is very very dangerous place to be…everything that we buy gets transported on trucks that use diesel…if you’re doing rough calculations you’re looking at an inflation number that can go from 2.4, all the way to 3.5.”

According to Chaturvedi, what the market is pricing in is determined by whether the war will be prolonged or not.

“I believe that even if the war stopped tomorrow,” Chaturvedi discussed, “…it’s going to take at least two to three months for this thing to stabilize.

Chaturvedi explained that the worst-case situation is if the war keeps going, and the Strait of Hormuz is shut down for six months, an oil barrel could skyrocket to $150. The oil price has never been that high since the 1970s.

“The good news is we’re self-sufficient when it comes to energy, that doesn’t mean we play with the market,” Chaturvedi said, “…heating will get impacted, our groceries will get impacted, furniture.”

Another aspect Chaturvedi touched on was that currencies in some East Asian countries are going down against the United States dollar.

“…we can buy more, but it’ll be difficult for them to buy our products,” Chaturvedi discussed, “…the dollar is becoming stronger, that’s causing our exports to be impacted…the best thing that can be is we can not prolong this war, and it looks like it is becoming a guerrilla warfare more than anything else.”