The Price of War

By Max from UNFTR.com

Several weeks ago, a narrow waterway twenty-one miles wide at its tightest point stopped the flow of one-fifth of the world’s oil. And now — even as a fragile ceasefire was announced with great fanfare — Israel launched what it called its most powerful strikes on Lebanon in the entire conflict. Within hours, the Strait of Hormuz was effectively closed to non-Iranian sanctioned tankers. Despite a fragile and likely non-existent peace agreement, the Strait is now being choked off on both sides as Donald Trump has now closed the other side of it.

Today I want to dissect what this means for the average consumer. Not for hedge funds. Not for energy traders. For you and me. For the price of food, the cost of goods, and the question that nobody in official Washington wants to answer honestly: how bad does this get before it gets better? Is there a chance it doesn’t get better at all this year?

Chokepoint

Before we get to the ceasefire theater, let’s establish the baseline — because what has already happened in the last five weeks is being dramatically underplayed. On February 28th, the United States and Israel launched strikes on Iran, assassinating Supreme Leader Ali Khamenei. Iran’s response was swift. On March 4th, Iran effectively closed the Strait of Hormuz, the most important chokepoint in the global energy system. In normal times, 19 to 21 million barrels of oil and petroleum products transit through that strait every single day. That’s roughly one-fifth of all global oil supply through a channel twenty-one miles wide.

Saudi Arabia attempted a workaround — rerouting exports through the Yanbu terminal on the Red Sea. The UAE redirected product as well. And both of those efforts have been substantial, but even with full utilization of every available bypass route, the world is still short six to seven million barrels of oil per day. This is according to multiple energy analysts.

https://www.meidasplus.com/p/the-price-of-war