Who said that the Strait of Hormuz is completely shut down? Who said that it is as dead as a grave? Please enter into the website of marine tracker. You can see it is as busy as a bee hive. This website can even list out various kinds of ships, their tonnage, goods, port of origin and destination…… As I have said, when war is broken out, the first one that dies is TRUTH. However, for flight tracker, it is true that all flights avoided the route of passing through skies of Iran and Iraq.
Why did such a rumor come out? It is because Iran started to lay mines on Hormuz Strait, US said they destroyed 16 mine laying ships, but from the news, 3 tankers were in smoke. No large fireball as that of the Red Blood Moon can be seen, just smoke. It means the hurt is not as large as before. Simply because mines are arms of World War II, it cannot sink a tanker of 400,000 ton or 500,000 ton, but can be a troublemaker. It can be a price mover of WTI and Brent Oil. What is the difference between WTI and Brent Oil? The latter mainly is produced in the North Sea, supplying Europe. WTI is produced in the US. Brent Oil normally has a price of $1 higher than WTI. There are 2 largest producers of Brent Oil, that is UK and Norway. North Sea Oil is situated east of the UK and south of Norway, why is it called North Sea Oil? Because it is north of the European continent!
When Iran lays mines in the Strait, Donald Trump is the happiest person. Why? When Israel and the US jointly fought against Iran, they were blamed as violating international law. Even Trump said he is removing the nuclear threat for Israel and the world, but the US MAGA group doubts whether they should take action since Iran is so far away from US. Now laying mines in international water is prominently against the international law of the UN. It will affect inflation of the US and the world. So, Trump is fighting for justice to make the Strait safe, and fighting to press down inflation of US.
Iran is on the east side of Hormuz Strait, and on the west side, the inner side is UAE, and the outer side is Oman. According to the High Sea Convention Law, all major waterways including the estuary or gulf entrance are public water. The 12 miles of territorial seas cannot cover international waterway. The countries nearby should make it free and safe for passing through, including on the surface of water and submarines. They should not allow any mines or illegal fishing such as illegal nets to hurt the baby fishes.
The narrowest part of the Strait has 3 passages of waterway in the middle, the west side is used for going in, and east side for going out, and the middle channel is a no-man zone, for avoiding collision in bad weather. No one is allowed to lay mines in the public waters. But the UN cannot do anything to prevent it. Modern war does not limit to the frontline only, destroying the supply chain is even more important. Thus, give the US a chance to seriously bomb all suppliers inland of Iran.
Firepower is justice! Might is Right!
The former expression carries a positive expression, that is a strong nation is carrying out enforcement for the sake of Heaven to destroy all serpents of sins like Don Quixote. The latter is an ionic and negative expression, meaning whose fist is larger, who is right, unreasonable will become reasonable.
When will the war end? Not so soon! Iran said their Supreme Leader Mojtaba Khamenei is safe. He had not turned up since the election and news said he is seriously hurt. No need to talk about the end of the war so soon. Better see how the price of WTI is pressed down. Analysts said the G7 and IEA will intervene and use strategic oil reserves; they have calculated the price of WTI should be under $90. But we still have to observe.
When will the price of oil go down? We can watch the oil future. The April price is higher than the spot rate (or current month), but the May price is lower than spot rate. We can have a reasonable expectation that the price will go down in May as it is market expectation even if it is not 100% accurate. So, watch it carefully.
About the Author
Daniel Yue has been an active investor since 1980, with experience spanning stocks, currencies, futures, metals, and bonds. A scholar of the Chicago School of Economics, he holds a Certificate with Distinction from Cambridge University and a degree in International Trading from National Taiwan University. He served as Chief Analyst for over 30 years and Chief Mentor at Sincere Finance. In 2017, he received an award from the University of Arizona for financial internship leadership.
The analysis and opinions expressed in this article are for educational purposes only and do not constitute financial advice. Investing involves risk. Please consult a qualified financial advisor before making investment decisions.
About the Author
Daniel Yue has been an active investor since 1980, with experience spanning stocks, currencies, futures, metals, and bonds. A scholar of the Chicago School of Economics, he holds a Certificate with Distinction from Cambridge University and a degree in International Trading from National Taiwan University. He served as Chief Analyst for over 30 years and Chief Mentor at Sincere Finance. In 2017, he received an award from the University of Arizona for financial internship leadership.
The analysis and opinions expressed in this article are for educational purposes only and do not constitute financial advice. Investing involves risk. Please consult a qualified financial advisor before making investment decisions.