New York Times:
“In a prolonged conflict, the combination of higher energy costs, disrupted logistics and a generalized confidence shock would constitute a meaningful drag on global trade volumes at precisely the moment the world economy was still digesting the inflationary and growth consequences of the tariff shock,” noted analysts at ING, a bank. “The mother of all bad timings
Fears of disruption to shipping on the Strait of Hormuz, the crucial waterway on Iran’s southern border through which a large share of the world’s oil and gas passes, upended energy markets. Oil prices continued to surge, with Brent crude oil, the global benchmark, rising more than 6 percent, to $83 a barrel, the highest level since mid-2024.
Natural gas prices soared. European natural gas futures jumped for a second day; prices have roughly doubled over the past two days. A measure of gas cargoes in Asia rose 45 percent on Tuesday.
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Ask yourself the simple question: why does China have 50,000 kilometers of high-speed rail — roughly 30,000 miles — and the United States has not one mile? Why is Chinese infrastructure advancing at a pace that would have seemed impossible a generation ago while American
infrastructure is literally falling apart? The answer is not complicated. China does not go to war. The United States is in nonstop, undeclared war. War that is never voted on, never debated, never honestly accounted for.
The cost is not just money. It is freedom. It is the steady transformation of this republic into a military state — one that funds foreign carnage while its own people live on crumbling foundations, both literal and figurative.
Brent crude futures have jumped 8% to roughly $78 a barrel after the Iran conflict began over the weekend. There are two scenarios that could cause a more severe and lasting impact on pump prices. One is a prolonged disruption to the flow of oil tankers through the Strait of Hormuz, through which about 20 million barrels a day of oil—or a fifth of global oil production—transits. Second is serious damage to the region’s oil production or infrastructure, especially the kind that would disrupt spare capacity in Saudi Arabia and the United Arab Emirates.
The worst-case scenario is one where Iran does serious damage to neighboring countries’ oil facilities, especially the export terminals that are difficult to repair and are within striking distance of Iran’s weapons systems, according to Clayton Seigle, senior fellow at the Center for Strategic and International Studies. He estimates that this kind of damage could send oil prices higher than $130 a barrel, which was the peak after Russia’s invasion of Ukraine.
Markets are used to quickly getting over geopolitical threats because the worst-case scenarios haven’t played out in recent history. The Strait of Hormuz hasn’t been disrupted in a serious way since the 1980s. Attacks on the region’s oil infrastructure—including two separate hits on Saudi Arabia’s oil infrastructure in 2019—have failed to do much damage. “We’ve had seven years of ‘boy who cried wolf’ ” since Iran-allied Houthis attacked Abqaiq, a key Saudi oil-processing facility, said Bob McNally, president of Rapidan Energy Group.
But the current crisis is on another level: The U.S. is no longer just playing hardball with Iran’s leaders. It is pushing for regime change. “Iran has no reason to hold back its most capable and powerful weapons, which includes its ability to disrupt the oil and gas markets,” according to Seigle. Iran attacked three commercial vessels around the Strait of Hormuz on Sunday. It also attacked Saudi Arabia’s biggest oil refineryovernight.
Stocks tumbled at the open on Tuesday as oil prices surged in response to the latest escalations in the Middle East.
The Dow Jones Industrial Average sank 1,263 points, or 2.6%. The S&P 500 fell 2.5%. The Nasdaq Composite slid 2.7%.
Front-month WTI crude oil futures surged 9.2% to $77.80, while Brent crude oil futures were up 9% to $84.81.
“Risk-off is the operative word as investors are now second-guessing how long this war with Iran is going to last and, in the interim, how much damage what is left of the leadership (quite a bit, apparently) can inflict on the oil (and gas) markets,” writes Rosenberg Research’s David Rosenberg.
