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Dire Straits Of Hormuz
Dire Straits Of Hormuz
Well, we didn’t have to wait long for ’John Wick: Chapter Portobello’ to begin, did we? Brent crude spiked 4.5% before giving up around half of those gains as a further two oil tankers–one Norwegian, one Japanese–were attacked in the Straits of Hormuz, forcing the evacuation of both vessels; that as Japanese PM Abe sat down with the Iranian government to try to dial down tensions with the US – and as the leadership refused to accept any message from President Trump. The US have now accused Iran of attacking the two ships, which follows on from two other recent tanker attacks, drones hitting Saudi oil pumps, and a missile hitting a Saudi airport this week. The easy market response was long oil, obviously, as well as a ‘Risk Off’ further leg down in bond yields. But who did this and why? And what does that say will happen next? Logically, it was either Iran, or the US, or a third party:
Iran is suffocating under US sanctions, a known instigator of such actions via proxies, and threatening the EU with walking away from the nuclear deal if they won’t help it out. An attack like this would be incredibly reckless…unless they are desperate enough to up the ante to see if a war-averse White House will press ahead with another ruinous Middle East conflict ahead of the 2020 elections and in the face of a Cold War with China. If that is the case then expect more provocations and more Risk Off even as Iran calls this all “beyond suspicious”, “economic terrorism”, and “sabotage diplomacy”.
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This Week In Energy: Geopolitical Triggers Could Spur More Price Volatility
This Week In Energy: Geopolitical Triggers Could Spur More Price Volatility
Tensions heated up in the Persian Gulf this week after Iran fired upon and seized a cargo ship near the Straits of Hormuz. Considered to be the most strategic and vital chokepoint for global oil trade, the narrow stretch of water is regularly patrolled by the U.S. Navy. Oil prices briefly surged before it was known who was on board the ship. Once it became known that the ship was carrying a Marshall Islands flag and had no Americans on board, tensions calmed a bit. Still, the U.S. Navy sent a destroyer to the Straits in order to try to force the Iranians to back down. “At first appearance, this does seem to be provocative behavior, but we don’t have all the facts yet,” Col. Steve Warren, a Pentagon spokesman, said amid all the confusion. Iran insists the incident was a commercial dispute over unpaid debt, but there are fears that Iran thought it was targeting a U.S. ship. In any case, the incident will surely not be welcomed by U.S. President Barack Obama, who is seeking to reach a historic agreement with Iran over its nuclear program.
In another maritime dispute, the war of words between China and its neighbors over sovereignty in the South China Sea heated up this week as well. First came a statement from the Association of Southeast Asian Nations (ASEAN), which said that China’s reclamation work in the South China Sea “eroded trust and confidence and may undermine peace, security and stability in the South China Sea.” China’s Foreign Ministry followed up with a terse response, saying it was “extremely concerned” over ASEAN’s statement because the conflict was not one between China and ASEAN, but rather a dispute that should be resolved between China and individual nations.
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