Key insights
- The author discusses potential investment opportunities arising from disruptions in the Strait of Hormuz, focusing on agriculture (WEAT, CANE, DBA) and coal (BTU). They highlight the risk of US export controls on oil and LNG, which could disproportionately harm emerging markets due to developed economies' ability to secure alternative supplies at higher costs. This could lead to increased demand for coal as an alternative energy source, but also negatively impact overall global growth and sentiment.
For those who want to look at next step of things they can invest in while the best trades from last year (AI) is facing tail risk.
I personally am playing the agriculture sector via $WEAT, $CANE and $DBA
but there are a lot of things to consider here. Especially if US puts export control on Oil (including refined petroleum products like diesel) and LNG. Supply constraints from the US will further hurt emerging markets and other international markets. The reason to do export control is to guarantee supply at home and thus lowering the prices of LNG and Oil inside the US (That is why we are seeing crude brent spread growing).
Sometimes it is important to think of 2nd and 3rd order effects, the reason emerging markets are hurt the most is because developed economies can afford to pay higher prices to have tankers and such rerouted to their ports which means emerging markets have to find alternatives for the their power supply. I personally like Coal and hold positions in $BTU
EDIT - cant edit title but i obviously meant to type Strait of Hormuz