ME Oil: Supposing Supposing the Straits were unfrozen…..
This note provides a toolkit for thinking through what happens if the Strait of Hormuz (SoH) is reopened, either fully or partially — and what happens to oil prices if it is not.
The best that can realistically be hoped for is a partial reopening of the SoH under some degree of Iranian control. That might produce a short burst of relief. But once the initial backlog of tankers have passed through, it would not release enough supply to restore the oil market to its pre-war equilibrium. In fact, other forces — particularly Russia and China — are already tightening conditions in the physical oil market.
The Wealth Preservation Portfolio therefore remains long crude and diesel, with a US$100 oil target further down the road.