With the recent military strikes on Iran from the United States, there is a new risk to oil markets around the world. At the moment, it is not known if energy facilities were damaged, but Iran produces a little over 3 million barrels of oil per day, which translates to about 3 percent of the global supply. Since the damage has been done, the shipping route through the Straight of Hormuz has slowed down due to oil tankers avoiding it, causing crowding near the entrance and leading people to panic, believing the route is at risk of disruption. Current traders are monitoring whether there will be a real disruption to Iran's exports and whether the Straight of Hormuz could close, causing prices to increase significantly.
This does a good job of highlighting how sensitive the global oil market is to political risk. The slowdown of shipping shows that perception alone can affect supply chains, and any actual disruption can impact global prices.
ReplyDeleteThis raises an interesting point about how much of the oil price movement is driven by actual supply changes versus markets physcology and expectations.
ReplyDeleteThis seems like this is going to have a large effect on European countries since they rely heavily on LNP.
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