Key insights
- Geopolitical tensions involving Iran, refinery attacks, and threats to the Strait of Hormuz are escalating, potentially leading to a severe global energy shortage. This situation is expected to negatively impact the S&P 500 due to increased CPI and supply chain disruptions, while boosting oil prices. European warnings further amplify the global economic concerns.
I posted on Friday about the news coming out over the weekend that continues to be bearish for the S&P, and Bullish for Oil.
As of today, we continue to see more bearish news:
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Iran has attacked refineries again in Kuwait. As mentioned on the prior post, these attacks are potentially the most bearish thing for the S&P, and the most bullish thing for oil. Every time there is refinery damage, a Hormuz re-opening becomes less and less helpful. These cause medium and long term supply disruptions, and medium and long term elevated oil prices, leading to a daisy chain impact on manufacturing and supply chains and an increase in CPI.
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The President has posted on Truth Social demanding Iran open the Strait of Hormuz, and threatening to destroy civilians infrastructure. And that is the polite description of his post. This is the opposite of a de-escalation signal.
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Iran has refused to speak with mediators and has refused to meet with the US. Iranian leadership and the IRGC has continued to post threats to US and allied infrastructure in the region.
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European and Australian leadership have begun to warn their populations about what is coming. And lest anyone thinks what happens in Europe doesn't affect the US, Europe is a consumer market and trading partner.
I continue to see, day by day, an increased certainty of a severe global energy shortage no longer able to be cushioned by floating reserves or the SPR release as we enter (tomorrow) Day 38 of a prolonged Strait of Hormuz closure with no end in sight, and less and less of an ability for oil and other commodity flows to be reestablished soon, even upon an opening of the Strait.
I continue to hold a majority of cash, OXY April/June calls, and some legacy positions (Microsoft shares, PATH/PYPL long call LEAPS).