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The market does enjoy watching a good war. But this is still not all clear, in my book. This is especially true now that the Straits are closed.
Goldman reckons due to the collapse of oil flows through the Strait of Hormuz, damage to energy infrastructure, and storage congestion that caused Iraq to reduce oil production by about 1.5 mb/d, Brent oil prices have increased 34% year-to-date to $82.
It makes the “extremely speculative assumption” that oil shipments from the Strait of Hormuz would stay flat at their current levels (about 15% of average 1) for five more days before progressively increasing to 70% over the next two weeks and then to 100% over the next two weeks.
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About the author
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific's leading geo-politics and economics portal.
He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.