ME – Cutting to the Quick
The US blockade so far appears to be only partially successful in halting Iranian oil shipments
or restoring freedom of navigation using the Omani exit route from the Straits of Hormuz (SoHo). The continued flow of oil from Iran will ease supply shortfalls for China and India but not the rest of Asia or Europe because it is not going there. Saudi supply of 5mn bpd through Bab-El-Mandeb is at risk. A head-to-head between China and the US if the US cuts Iranian shipments to China is on the cards.
The hit from supply shortages will only be felt in developed economies from now on. Demand destruction would be abrupt and severe. This is the QS forecast. Spot prices for Brent would exceed US$ 125/bbl. Markets are very over optimistic. This is reflected in the Wealth Preservation Portfolio.
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