Simulations of US-Iran War and Its Impact on Global Oil Price Behavior

20 Pages Posted: 24 Aug 2019

See all articles by Mario Arturo Ruiz Estrada

Mario Arturo Ruiz Estrada

Universidad de San Carlos de Guatemala; Center of Latin American Studies (CLAS) - University of Malaya; University of Malaya (UM) - Social Security Research Centre (SSRC)

Donghyun Park

Asian Development Bank - Economic Research

Tahir Muhammad

Comsats University Islamabad

Alam Khan

KUST

Date Written: August 22, 2019

Abstract

We perform simulations to assess the impact of a war between the US and Iran on global oil price behavior. To do so, we evaluate different levels of war intensity and oil price behavior from a multidimensional perspective. In this context, we simulate various scenarios using a simulator which is based on a complex algorithm and multidimensional coordinate spaces. This new simulator is the “War Oil Crisis Simulator (WOC-Simulator)". The WOC-Simulator provides policymakers and researchers with a new, simple analytical tool to study the impact of war on oil prices. We apply the simulator to different war scenarios between the US and Iran between 1980 and 2025. The two countries have been geopolitical adversaries since 1979, when an Islamic revolution toppled a pro-Western monarchy. The US remains the world’s only global superpower and Iran is a major oil exporter with significant regional geopolitical influence. Persistent conflict between the two countries in the Middle East, a vital oil-producing region, may disrupt smooth flow of global oil supplies and thus destabilize global oil prices.

Keywords: War, oil, oil price, US, Iran, economic modeling, economic desgrowth

JEL Classification: R11, R12

Suggested Citation

Ruiz Estrada, Mario Arturo and Park, Donghyun and Muhammad, Tahir and Khan, Alam, Simulations of US-Iran War and Its Impact on Global Oil Price Behavior (August 22, 2019). Available at SSRN: https://ssrn.com/abstract=3441130 or http://dx.doi.org/10.2139/ssrn.3441130

Mario Arturo Ruiz Estrada (Contact Author)

Universidad de San Carlos de Guatemala ( email )

Ciudad Universitaria Zona 12
Guatemala, Guatemala city
Guatemala
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HOME PAGE: http://www.usac.edu.gt

Center of Latin American Studies (CLAS) - University of Malaya ( email )

R&D Wisma
Kuala Lumpur, 50603
Malaysia
+60126850293 (Phone)

HOME PAGE: http://ssrc.um.edu.my/

University of Malaya (UM) - Social Security Research Centre (SSRC) ( email )

Malaysia

Donghyun Park

Asian Development Bank - Economic Research ( email )

6 ADB Avenue, Mandaluyong City 1550
Metro Manila
Philippines

Tahir Muhammad

Comsats University Islamabad ( email )

Park Road
Chak Shahzad
Islamabad, North-West Frontier Province 44000
Pakistan

Alam Khan

KUST ( email )

Department of Economics Kohat University of Scienc
Kohat, Khyber Pakhtunkhwa 26000
Pakistan

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