(Yahoo! Finance) - Countries running out of oil soon is a real possibility as the US-Israeli war on Iran continues to leave the critical Strait of Hormuz effectively closed.
"As the last tankers that crossed the Strait of Hormuz before the war are reaching their destination, concerns about potential oil shortages are rising," Goldman Sachs strategist Daan Struyven wrote in a new note.
Struyven added, "Our three-way analysis highlights already critically low supplies of petrochemical feedstocks — naphtha and LPG [liquefied petroleum gas] — in Asia, with cross-product scarcity in multiple Asian countries in April. Some remaining flows from the Strait of Hormuz, along with alternative imports, export restrictions, and domestic oil stocks, can soften the impact of a Hormuz shock on gasoline and diesel; however, the risks of fuel oil and naphtha shortages remain high, especially in Asia."
Oil prices have been on a roller-coaster ride as Operation Epic Fury rages on.
Over the past two weeks, oil prices have experienced extreme volatility, recently surging to their highest levels since the military campaign began in late February.
After a brief dip below $100 in late March due to short-lived hopes of a deescalation, prices spiked sharply following President Trump's primetime address on April 1. During that speech, the president pledged to hit Iran "extremely hard" over the next two to three weeks, effectively signaling that there is no near-term exit from the conflict.
Consequently, West Texas Intermediate (WTI) crude (CL=F) surged 11.4% to reach $111.54 per barrel on April 2, while Brent crude (BZ=F) jumped to $109.03 per barrel.
The president again ratcheted up the war rhetoric over the weekend, which could place more upward pressure on oil prices and leave the Strait of Hormuz hanging in the balance.
“Open the F***in’ Strait, you crazy bastards, or you’ll be living in Hell,” Trump wrote in a Truth Social post, warning of dire consequences if Tehran does not reestablish maritime transit before the set deadline on Monday.
“Tuesday will be Power Plant Day, and Bridge Day, all wrapped up in one, in Iran,” Trump said in his message on the social media platform.
As a narrow waterway between Oman and Iran, the Strait of Hormuz serves as the world's most important oil transit choke point, typically facilitating the passage of 20 million barrels of oil per day—roughly 20% of the global seaborne supply.
Before the US conflict with Iran started, an average of 138 vessels transited the strait daily. Since the operation began, that number has plummeted by over 90%, with daily crossings often falling into the single digits.
"For markets, the flow of oil (transit through the Strait) matters more than the stock of oil (energy infrastructure to produce it) because flow keeps the global economy going, given that the oil market pre-conflict was close to being overstocked (i.e., oversupplied)," Fed Watch Advisors founder Ben Emons explained. "To that effect, Strait reopening works like the pandemic reopening and has characteristics priced into financial markets, such as being a form of quantitative easing (which was inherently more about flow than stock)."
By Brian Sozzi - Executive Editor
