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Guyana stands to benefit from a windfall in oil revenues following Iran’s closure of the Strait of Hormuz, but the disruption could also drive inflation, economist Richard Rambarran said on Monday.
Oil prices have surged past US$100 per barrel as tensions between Iran and Israel escalate, with Israeli strikes on Iranian oil depots over the weekend and retaliatory attacks by Tehran across the Middle East. Guyana’s 2026 budget, presented in January, was based on a conservative oil price assumption of around US$59 to US$60 per barrel.
Speaking to Ignite News, Rambarran described the situation as a “terms of trade paradox,” where higher export revenues may be offset by rising domestic prices.
“The government would benefit from windfall revenue, but there is a potential knock-on effect on commodity prices, which eventually reach the domestic market as imported inflation,” he said.
Guyana, which exports more crude oil than it consumes domestically, is well-positioned to manage such shocks, he added, noting that policy tools from previous crises, including the Suez Canal blockage and post-COVID supply chain disruptions, remain in place. The removal of the excise tax on fuel provides an additional buffer.
“Should fuel prices balloon, there is always the lever of providing a short-term subsidy on petroleum to cushion price impacts,” Rambarran said.
The economist said the impact will largely depend on the disruption’s duration. Around 20 to 25 percent of global energy and energy-related commodities pass through the Strait of Hormuz. “Short-term disruptions may have limited effects, but prolonged interruptions could drive higher production costs globally,” he said.
The strait is closed following escalating tensions between Iran, the United States, and Israel. Iran has threatened to attack any ship attempting to transit the waterway, forcing shipping companies and insurers to halt or reroute tanker traffic, affecting roughly one-fifth of global oil supply.
