- 7/11/2025
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LifestyleTranscript
00:00The Iranian parliament has voted to close the strategically vital Strait of Hormuz.
00:06If Iran actually carry out what they've threatened to do,
00:09it would be three times the size of the shocks we've seen in the past.
00:13It would be, I think, a massive escalation that would merit a response, not just by us, but from others.
00:19The ongoing conflict between Israel and Iran could plunge the entire global economy into recession.
00:25What's up you guys, it's Graham here.
00:26So it's official. Things are going from bad to worse.
00:30For the first time ever in history, Iran is reportedly moving to shut down the Strait of Hormuz,
00:35which, if successful, has the potential to completely destroy the global economy.
00:40Like, without exaggeration, this two-mile shipping route is the lifeline from the Persian Gulf to the open ocean.
00:4520 million barrels of oil pass through here daily.
00:48And if it shut down, even just temporarily, the fallout would be absolutely disastrous.
00:53This is why we have to talk about exactly what just happened,
00:57why the Strait of Hormuz is suddenly becoming a worldwide issue,
01:00how the United States suddenly got involved,
01:03and then how this is likely to affect you very soon.
01:06Because unlike my previous videos, where I just recommend dollar-cost averaging into a broad index fund,
01:11regardless of what happens,
01:13you deserve to know, with facts, what's actually going on,
01:16and why this is so quickly becoming such a big deal.
01:19Although before we start, as usual, if you appreciate the unbiased, breaking news videos like this,
01:24with just the important information to bring you up to speed,
01:27it would mean the world to me.
01:28If you hit the like button or subscribe if you haven't done that already,
01:31it seriously helps out the entire channel tremendously,
01:34because videos like this often do get somewhat restricted.
01:37And as a thank you for doing that, just to lighten the mood a little bit,
01:40here's a picture of a baby chinchilla.
01:41So thanks so much, and also a big thank you to CookUnity for sponsoring this video,
01:44but more on that later.
01:45All right, so in terms of what's going on, all of this comes down to one singular point,
01:49the Strait of Hormuz.
01:51For those unaware, this is a narrow stretch of water that separates the Persian Gulf from the rest of the world.
01:56And in terms of its importance,
01:58one, it's surrounded by major oil-producing countries who make up half of the world's supply.
02:03Two, geographically, it is the only passage from the Persian Gulf to the open ocean.
02:08And three, Iran has significant influence to make it nearly impossible for anybody to enter or exit,
02:14making this really the perfect storm.
02:17See, one-fifth of the entire world's oil supply and one-third of the world's entire natural gas
02:22passes through this small waterway on a daily basis.
02:25And unfortunately, there are very few, if any, alternatives if something or someone
02:30were to block ships from passing through.
02:33Meaning, this one little area basically controls the entire world.
02:37Now, in terms of who benefits the most from this Strait being opened, the honest answer is everybody.
02:43Like sure, even though it's true that 84% of the oil and gas exports that pass through there
02:48go to Asian markets like China, by keeping the oil flowing, it frees up supply from other energy
02:53producers, which allows the United States market to operate more efficiently.
02:57It helps keep prices stable and reduces the impact of supply shocks.
03:01All of this is thanks to what's called the Transit Passage.
03:04This is a legal framework under the United Nations Law of Sea, which allows commercial
03:08ships to pass through areas like the Strait of Hormuz.
03:12But there's a bit of a catch.
03:13Within the two-mile-wide transit lane, parts fall within Iran's territorial waters.
03:18And even though so far they've complied with the United Nations, they've never ratified
03:22the agreement to allow for open transit.
03:25Meaning, they could turn their backs to try to prevent ships from passing through their
03:29territory, which is what's beginning to happen.
03:32After the United States attacked Iran's strategic facilities over the weekend, Iran threatened
03:37to close the Strait entirely, which would disrupt the flow of oil and basically shut down the
03:42entire world.
03:43So what would happen if this were to actually go through?
03:46Well, to talk about that, you first have to understand oil prices.
03:49On the most basic level, the United States uses about 20 million barrels of oil every single
03:54day, which makes us the number one consumer of oil in the world by far.
04:00But there's a bit of a catch.
04:02Since we only produce 18.6 million barrels of oil a day, we've become reliant on other
04:07countries to help fill that deficit.
04:10And this is where things get interesting.
04:11If the Strait of Hormuz is closed off, even just temporarily, all of a sudden, oil prices
04:17would rise.
04:18Shipping costs would increase.
04:19Production of raw materials goes up in price.
04:21And transportation would become that much more expensive.
04:25Like the Federal Reserve estimates that every $10 a barrel jump in crude oil prices could
04:29result in 0.2% more inflation.
04:32On top of that, the United States personally receives about 7% of its entire oil supply directly
04:37from the Strait of Hormuz, leaving us with no other option other than to pay higher prices
04:42to other exporting nations that are closer to us, like Mexico and Canada.
04:46Look, to give you an idea just how sensitive oil prices have recently become, even the risk
04:51of a potential shutdown caused oil to spike 10% pretty much overnight.
04:55And in terms of how high it could go, JPMorgan believes that we could see oil rise as high
05:00as $130 a barrel in the event it's closed for a sustained period.
05:04This would likely lead to what's called cost-push inflation, which occurs when energy prices are
05:08on the rise.
05:09And because manufacturing costs increase, that eventually gets passed on to use the consumer
05:14in the form of higher prices.
05:15That, in turn, is likely to lead to higher inflation numbers, which would result in the
05:19Fed keeping higher interest rates for longer, which increases the cost of borrowing.
05:24It's also reasonable to expect that as higher energy costs take up a larger percentage of
05:29disposable income, people's spending would scale back, which is negative for stocks.
05:34But this is really only the tip of the iceberg.
05:36For the rest of the world, including China, Japan, India, and South Korea, they are directly
05:41reliant on the oil imported through this narrow passageway.
05:45So if this shuts down, they would feel the most immediate and most intense effects, effectively
05:50just destroying the global economy.
05:53But again, all of this is just barely scratching the surface.
05:56If the strait were closed, it could very quickly and easily turn into a global catastrophe of
06:01military escalation, as practically every country does whatever they can to get the strait
06:06back open by whatever means necessary.
06:08In fact, it's just reported that there are close to 50 large oil tankers scrambling to
06:13leave the strait of Hormuz right now, with the expectation that the strait could be blockaded
06:17in the coming days.
06:18Even President Trump said that any retaliation by Iran against the United States of America
06:23will be met with force far greater than what was witnessed tonight, which refers to the
06:28recent operations to disable any of Iran's potential experiments.
06:33I'm being very gentle with my words here, if you couldn't tell, just so the video doesn't
06:36get restricted in any means, so bear with me on some of this.
06:39Anyway, in terms of whether or not the strait of Hormuz could actually be shut down, and
06:43the realistic impacts this would have on the global economy, here's what you came for.
06:48Because believe it or not, this is not the first time that we've gotten close to a shutdown.
06:52Although before we go into that, this is a situation that is changing so quickly that
06:56I pretty much had to drop everything that I was doing to get this video out as soon as possible.
07:00Usually when this happens, I just go the entire day without eating, because I don't want to take
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08:45Thank you so much.
08:46And now let's get back to the video.
08:47All right.
08:47So in terms of what could happen next, let's talk about the biggest topic on everybody's
08:51mind, and that would be closing the Strait of Hormuz.
08:54Up until this point, thankfully, there has not been an actual closure, because the impact
08:58would be pretty far-reaching, and Iran would pretty much isolate themselves from the rest
09:02of the world by cutting off their access to natural resources.
09:05But that doesn't mean there haven't been some very close calls in the past, like one,
09:10the tanker battle of the 1980s.
09:12During a territorial dispute between Iran and Iraq, both sides attacked commercial tankers
09:17in the Gulf, with the expectation of cutting off the other's oil supply.
09:21But even though there was an ongoing battle, and some trade was temporarily disrupted,
09:25the Strait was never closed, because doing so would do more damage than necessary and
09:29hurt both sides equally.
09:31So the markets eventually just recovered.
09:33After that, though, we have two, the 2012 sanctions threat.
09:37This escalated when the United States blamed Iran for a series of tanker attacks in the Gulf,
09:42which were carrying petroleum products from Saudi Arabia, Qatar, and the UAE.
09:46As you would assume, Iran once again threatened to close off the Strait as a punishment for
09:51disrupting their economy, which resulted in the price of oil increasing 4% due to heightened
09:55uncertainty.
09:56But wouldn't you know it, the Strait was never actually closed.
09:59Essentially, the chance of Iran closing the Strait has such high consequences that if they
10:04did, they would face almost immediate backlash, especially since China is one of the top recipients
10:10of all the oil coming out of the region.
10:12And since Iran and China are on good terms, having worked together for the last few decades,
10:17it's unlikely that Iran would do anything to jeopardize their largest alliance.
10:21But that also does not mean that markets will not react very negatively until it's
10:26eventually resolved.
10:27And this is what we are currently seeing.
10:29Overall, no surprise, we are seeing higher oil prices almost immediately.
10:33Purely because oil flow could be disrupted, and insurance prices on oil ships have increased
10:3760% in just the last few weeks.
10:40All of this is likely to result in higher inflation, and it might continue for quite some time.
10:44For example, the former energy advisor just said that shipping could be interrupted for
10:48weeks or months, rather than the oil market's view that the US Navy would resolve the situation
10:53in hours or days.
10:54On top of that, we're also seeing a bit of a sell-off in the stock markets because higher
10:58prices threaten to cause the Federal Reserve to keep interest rates higher for longer.
11:02Not to mention, if costs do increase, consumer spending is expected to pull back by a lot,
11:08given that 57% of Americans are already living paycheck to paycheck.
11:12This sell-off is also evident throughout Bitcoin, which recently fell below $100,000.
11:16Again, as investors grow weary of international conflict, during a time where, let's be real,
11:22anything can happen.
11:23However, to help dampen some of these concerns, there is some good news.
11:26The United States has what's called the Strategic Petroleum Reserve, which was created in
11:311975 after the Saudi oil embargo caused oil prices to nearly quadruple within a single
11:36year.
11:37This reserve, which currently holds nearly 400 million barrels of oil, is meant to be used
11:42in such a way for the United States to maintain reasonable levels of oil within the country
11:47during times of need, or in the event of an emergency.
11:50All of this suggests that if the strait were closed off, the United States would have enough
11:54oil to sustain itself until hopefully the strait is opened back up again.
11:59And even though certainly prices would go higher, it wouldn't be enough to cripple the U.S.
12:03economy overnight.
12:05Hopefully.
12:05That's why, in terms of what I think about this as a random dude on YouTube making videos
12:10in a half-converted garage, I personally think that the chance of it actually shutting down
12:15is pretty much slim to none.
12:17And any threats we see are probably baseless and not actually going to happen.
12:22Because, let's be real.
12:23If they closed it down, it probably wouldn't be closed for long, because they would have
12:27the full force of the United States and the rest of the world doing anything they can
12:32to get it back open again.
12:33Not to mention, based on the multiple past threats of a shutdown that's never actually
12:38materialized, I have no doubt that this time is probably not going to be any different.
12:42But then again, anything can happen.
12:44And as much as I would love for this to be resolved as soon as possible, sometimes these
12:50events, unfortunately, are rather unpredictable.
12:52So let me know what you guys think down below in the comments section.
12:55I will do my best to read and reply to as many of you as I can.
12:58I hope this was helpful.
13:00And until next time.
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