Geopolitical Risk to Oil Supply is HIGH
Posted: Sat Jun 23, 2018 9:41 am
The Strait of Hormuz = The World’s Most Critical Oil Choke Point by Nick Giambruno - Editor, The Casey Report
> Trump has recently staffed up on known war hawks. In April, he made John Bolton his National Security Advisor and Mike Pompeo his Secretary of State. Both have been eager to bomb Iran for years.
> In early May, Rudy Giuliani, one of Trump’s lawyers and a longtime political ally, announced that Trump is “committed to regime change” in Iran.
> A few days later, President Trump pulled out of the 2015 Iran nuclear deal. He also re-imposed economic sanctions on Iran.
Iran has the world’s third-largest proven oil reserves, or 10% of the world’s total. It exports about 2.4 million barrels of oil per day. China, India, and Europe buy most of it.
A war between Iran and Israel (and its US-led allies) would wreak havoc on the oil market. That’s because Iran holds a very powerful card…
Iran could effectively shut down the Strait of Hormuz, the narrow channel connecting the Persian Gulf to global markets. It is the only sea route from the Persian Gulf to the open ocean.
Tankers moving oil from Iraq, Iran, Saudi Arabia, Qatar, Kuwait, and the United Arab Emirates all have to pass through the strait. That translates into roughly 35% of the world’s oil traded by sea.
Nearly $2 billion worth of oil passes through the Strait of Hormuz every day. It’s the most critical oil choke point in the world.
In the event of an all-out war, Iran would quickly shut down the Strait of Hormuz. It’s been blatantly clear about this.
Credible studies have shown that—in a best-case scenario for the US Navy—Iran could seal off the Strait with sea mines and asymmetrical warfare techniques for at least a month before the US could reopen it. The Pentagon itself has admitted as much.
If and when a war with Iran happens—even if there’s only a whiff of it happening—investors should expect the third and most dramatic oil shock.
Of course, we’re not cheering for a war, or the collateral damage that would inevitably come with it.
Nevertheless, the odds of a big war in the Middle East starting soon are high. That means a sudden spike in the price of oil is equally likely.
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My take is that when the "Grace Period" that Trump gave companies for getting out of Iran comes to an end this fall, he will turn up the heat on the Iranian leadership. Sanctions could quickly take 500,000 and maybe 1,000,000 barrels of supply off of the global oil market. The other OPEC nations cannot make up the difference. They will have trouble getting production up to the old quotas. Regardless of what happens to Iran, the global oil market is going to tighten rapidly this summer. - Dan
> Trump has recently staffed up on known war hawks. In April, he made John Bolton his National Security Advisor and Mike Pompeo his Secretary of State. Both have been eager to bomb Iran for years.
> In early May, Rudy Giuliani, one of Trump’s lawyers and a longtime political ally, announced that Trump is “committed to regime change” in Iran.
> A few days later, President Trump pulled out of the 2015 Iran nuclear deal. He also re-imposed economic sanctions on Iran.
Iran has the world’s third-largest proven oil reserves, or 10% of the world’s total. It exports about 2.4 million barrels of oil per day. China, India, and Europe buy most of it.
A war between Iran and Israel (and its US-led allies) would wreak havoc on the oil market. That’s because Iran holds a very powerful card…
Iran could effectively shut down the Strait of Hormuz, the narrow channel connecting the Persian Gulf to global markets. It is the only sea route from the Persian Gulf to the open ocean.
Tankers moving oil from Iraq, Iran, Saudi Arabia, Qatar, Kuwait, and the United Arab Emirates all have to pass through the strait. That translates into roughly 35% of the world’s oil traded by sea.
Nearly $2 billion worth of oil passes through the Strait of Hormuz every day. It’s the most critical oil choke point in the world.
In the event of an all-out war, Iran would quickly shut down the Strait of Hormuz. It’s been blatantly clear about this.
Credible studies have shown that—in a best-case scenario for the US Navy—Iran could seal off the Strait with sea mines and asymmetrical warfare techniques for at least a month before the US could reopen it. The Pentagon itself has admitted as much.
If and when a war with Iran happens—even if there’s only a whiff of it happening—investors should expect the third and most dramatic oil shock.
Of course, we’re not cheering for a war, or the collateral damage that would inevitably come with it.
Nevertheless, the odds of a big war in the Middle East starting soon are high. That means a sudden spike in the price of oil is equally likely.
--------------------------
My take is that when the "Grace Period" that Trump gave companies for getting out of Iran comes to an end this fall, he will turn up the heat on the Iranian leadership. Sanctions could quickly take 500,000 and maybe 1,000,000 barrels of supply off of the global oil market. The other OPEC nations cannot make up the difference. They will have trouble getting production up to the old quotas. Regardless of what happens to Iran, the global oil market is going to tighten rapidly this summer. - Dan