ATFX: Strait of Hormuz closed again, international crude oil supply remains unstable
ATFX: At 12:00 a.m. local time in Iran, the authorities announced: In view of the unsafe situation caused by foreign intervention, the Strait of Hormuz is closed as of today. Previously, the US command stated that it had carried out another round of strikes against Iran. Iran also said that retaliatory actions are continuing.
The United States and Iran signed a memorandum of understanding across the air on June 17. In less than a month, this memorandum was violated. The US and Iran blamed each other, believing that the other side violated the agreement first. Regardless of who bears greater responsibility, the reality is that the Strait of Hormuz has been closed again, and the international crude oil supply side is facing a new round of impact.
According to data from Iran, a total of 11 commercial ships passed through the Strait of Hormuz in the past 24 hours, including 8 oil tankers and 3 cargo ships. The US claimed that 20 ships passed through; third-party agencies believe that only 6 ships passed through. Regardless of whose data is more accurate, compared to the average daily traffic of 135 ships before the US-Iran conflict, the current ship traffic in the Strait of Hormuz is at a historical bottom area.
Figure 1, Third-party data on the number of ships passing through the Strait of Hormuz - ATFX
The US and Iran signed a memorandum of understanding on June 17, and the total number of ships passing through the strait the previous day was 14; on June 25, the number of ships passing through the strait reached a peak of 82, of which 61 sailed out and 21 sailed in. On June 25, a Singaporean cargo ship was attacked by an Iranian drone while passing through the strait. The IMO Maritime Organization announced the suspension of the evacuation plan for detained ships. It was from this day that the relationship between the US and Iran changed from a peaceful state under the memorandum of understanding to a state of conflict with mutual attacks.
There are three expectations for the future development of the situation: First, neither the US nor Iran is willing to compromise, and the current local conflict evolves into a global strike, and the situation regresses to before June 17. The second scenario is that in order to avoid a lose-lose situation, both the US and Iran take a step back, and the current conflict ends inconclusively (there may be several meetings). The third scenario is that the conflict between the US and Iran continues, but the passage of ships through the Strait of Hormuz is not affected, which can minimize the negative impact of energy prices on the global macro economy.
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Looking at the current point in time, the first scenario has the highest probability of occurring. Iran unilaterally announced the closure of the Strait of Hormuz, and oil from the Gulf region cannot be smoothly exported to consumer countries. International energy prices are likely to rise again. Although the United States is a net crude oil exporter, it cannot completely fill the gap caused by the decline in Gulf oil exports. For example, EIA crude oil inventories fell from 464.717 million barrels in the week of April 3 to 408.359 million barrels on June 26, a significant drop.
In addition, energy prices directly impact US CPI data. Once high inflation cannot be suppressed for a long time, $Donald Trump(TRMP.US) may face the problem of declining support. The United States will hold midterm elections in November. Iran's blockade of the Strait of Hormuz to push up US inflation may eventually lead to $Donald Trump(TRMP.US) suffering a serious defeat in the election. Under the pressure of high inflation and elections, it is boldly speculated that the United States may make some concessions.
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