Thanks To The War In Iran, A Moment Of Reckoning Has Arrived For The Entire Global EconomyMichael Snyder
Global financial markets are starting to shake, and it is because of what is happening in the Middle East. At this stage, every day is a rollercoaster ride for investors, and that is not likely to change any time soon.
The Iranians have paralyzed traffic through the Strait of Hormuz, and trying to reopen it by force is going to be exceptionally difficult to do. As you will see below, this is going to have enormous implications for every nation on the entire planet. We are in the early chapters of a major global crisis, and a tremendous amount of pain is ahead.
On Thursday, Mojtaba Khamenei issued a statement in which he boldly declared that the Strait of Hormuz must remain closed in order to “pressure the enemy”…
Iran’s new supreme leader, Mojtaba Khamenei, said Thursday that the closure of the Strait of Hormuz maritime passage should be continued as a “tool to pressure the enemy,” in his first public statement since being appointed.
Khamenei also said all U.S. military bases in the Middle East should close immediately and “those bases will be attacked,” in televised comments translated by Reuters.
Oil prices extended gains following the statement, read out by a state TV broadcaster. The shipping of oil through the Strait of Hormuz has effectively stopped since the war began, causing global oil prices to soar. Iran warned on Wednesday that the price per barrel could climb to $200.
Needless to say, the Iranians are fully capable of carrying out Khamenei’s threats.
Several more vessels have been attacked within the past 48 hours, and that includes a U.S.-owned oil tanker that was completely destroyed…
Iran’s semi-official Tasnim news agency also released a dramatic video apparently showing a missile strike on a U.S.-owned tanker in the Persian Gulf. The video shows a massive explosion on a vessel that is then engulfed in flames as people aboard what appears to be an IRGC attack boat celebrate. CBS News Confirmed identified the vessel as the Safesea Vishnu, a crude oil tanker sailing under a Marshall Islands flag, but owned by the New Jersey-based company Safesea Group LLC
Now that Iran has officially closed the Strait of Hormuz, it will be up to the U.S. military to try to reopen it.
This will not be an easy task.
In fact, some military experts are warning that it could take months to accomplish that goal…
Unblocking the Strait of Hormuz is shaping up as a remarkably complex and time-consuming task.
The fate of the global oil markets—and the global economy—rests on whether ships can traverse the 22-mile-wide waterway from the Persian Gulf to the Gulf of Oman. More than 10 days after the U.S. and Israel attacked Iran, there is no clear plan for reopening it. Military experts say the effort is so daunting it could take months to achieve, absent a fast and full cease-fire.
So exactly why will it be so difficult to reopen the Strait of Hormuz?
As one expert has aptly noted, the Iranians are able to block traffic through the Strait in a multitude of different ways…
The problem is that the strait can’t be cleared solely through a bombing campaign, or an attack by destroyers. Iran’s navy has been severely depleted by the U.S., but the country doesn’t need large attack ships to scare commercial vessels away. Its weapons include mines, fast attack boats, missiles and drones. Layered on top of each other, they become exceptionally difficult to remove.
“They’ve created an integrated, vertical stack of threats that can cover the strait from undersea all the way to above the surface,” said Jonathan Schroden, chief research officer at the Center for Naval Analyses, a federally funded nonprofit that does research for the Navy.
If you take out all of their missiles, they would still have thousands of drones.
If you could somehow locate and eliminate all of the drones, they would still have their fast attack boats.
And even if you could eliminate all of their fast attack boats, they would still have thousands of naval mines.
My point is that this crisis is not going to be resolved easily.
And that is really, really bad news for the global economy.
Right now, approximately half of the available global fleet of liquified natural gas carriers is trapped in the Persian Gulf…
According to the WSJ, at least 20 LNG carriers about half the available global fleet – are trapped in the Persian Gulf, with daily freight costs soaring as demand from Asia surges, according to ship brokers.
This is a nightmare.
Liquified natural gas prices have already soared in Europe and in Asia, and this is probably only just the beginning…
Ship brokers said the 20 ships trapped in the Persian Gulf make up nearly half of all LNG ships currently available for charter, with daily rates rising to more than $200,000 from less than $98,000 before the start of the Iran hostilities.
Energy traders expect LNG prices to rise by early next week, adding to this week’s 40% rise in Asia and Europe. “The effect on LNG shipping will outlast the conflict for a few months,” Karathanos said.
Amid the scramble to procure LNG, more shipments bound for Europe are diverting to Asia. At least nine cargoes initially headed to Europe have changed course to Asia since the start of the fighting, according to ship-tracking data compiled by Bloomberg, with the trend accelerating in recent days. A buffer of spare supply is quickly drying up, threatening more competition and higher prices for both regions.
Nearly half the world’s traded urea — the most widely used nitrogen fertilizer — comes from the Gulf region, with Qatar accounting for one-tenth of the global supply, according to Bloomberg Intelligence.
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