Hi folks, Winter is coming! If you thought that your week was chaotic, wait until you see what just dropped in the Persian Gulf over the few days. Donald Trump and his buddy Netanyahu will soon be re-attacking Iran. Looks like oil supply from Middle East will be cut off for a very long time as Iran will be continuing with their blockage of the Straits of Hormuz. With oil availability tight despite US, Canada, Venezula, Russia etc ramping up oil production for exports and China curbing their oil consumption, it has been reported that prices will remain high and even rocketed.
The Immediate Threat: Geopolitical Shortage (Days to Weeks) is what happens if Trump acts on his threat of another strike.
The Hormuz Chokepoint is causing over 14 million barrels per day of oil production to be shut in or stranded due to the de facto closure of the Strait of Hormuz. Because nearly 20% of the world’s seaborne oil transits this narrow channel, a renewed U.S. strike would likely cement this blockade through Q3 2026.
Global oil inventories are currently already being drawn down at a staggering, historic pace of roughly 4 million to 8.5 million barrels per day. Even with coordinated Emergency Stock Releases from the IEA, these storage reserves can only act as a buffer for a few months. Refinery Starvation: Refineries outside the Middle East (particularly in Asia, which buys 75% of Gulf oil) are already slashing operations because they cannot source the specific types of crude they need. A renewed strike will immediately exacerbate the shortage of middle distillates like diesel and jet fuel, causing localized fuel rationing and skyrocketing pump prices well past $4.00 a gallon in the U.S.
The Expected Shortage Timeline
So yes, we are already in a structural shortage covered by emergency reserves. If the ceasefire permanently collapses, those emergency buffers will rapidly deplete, threatening severe physical supply crunches for oil-importing nations very soon in another 2-3mths.Yes, this is how dire our current situation has become.
Parting Thoughts and REITs/Bonds Being Whacked Again
Sadly, my SREITs have been badly battered by the stock market this week due to the fear of inflation leading to extreme interest rate hikes that will inevitably affect their net profits. Bond funds also find their valuation being hammered from expectation of a higher interest rate environment. Haiz, nothing is safe it seems these days. Let's keep our fingers crossed that Trump is only bluffing about renewed attacks on Iran. The stubborn old man has brought much grief to the world economies.
No comments:
Post a Comment