Weekend Edition.
Time is on whose side?
1. The price of crude oil has been rising since the start of the Iran war, with the spike in Asian benchmark Dubai crude particularly pronounced as countries reliant on Middle East oil compete for its dwindling supply. The spot price for Dubai benchmark crude reached $169.8 per barrel Thursday, up $17.9, or 12%, from the previous day. This is 2.4 times the $70.7 on Feb. 27, before the U.S. and Israeli attack on Iran, and the highest since data became available in 1986. Meanwhile, European benchmark Brent crude futures and U.S. benchmark West Texas Intermediate futures have risen approximately 50% since the start of the war. The price gap between Dubai and the U.S. and European benchmarks widened to $60 to $70. (Source: asia.nikkei.com. Italics mine.)
2. Bloomberg:
The war in the Middle East has created major disruptions to global supplies of nitrogen-based crop nutrients. Now a potentially bigger threat is emerging in another important part of the fertilizer market.
The focus since the conflict began has been on urea, a key nitrogen fertilizer used on corn. Prices for the nutrient have surged as the war blocks shipments through the Strait of Hormuz, sending farmers scrambling to procure supplies. What’s been largely overlooked in the chaos is the risk to phosphate fertilizers — key for crops like soybeans, a cornerstone of food production.
The Middle East accounts for only about a fifth of global trade for three key phosphate products, according to The Fertilizer Institute. But almost half of the world’s supply of sulfur — which is turned into sulfuric acid for the processing of phosphate fertilizer — comes from countries in the Middle East vulnerable to disruptions in the Strait of Hormuz.
The effects along the supply chain could start to be “exponential” if the conflict continues for much longer, once producers work through existing sulfur and sulfuric acid reserves, said Andy Hemphill, who covers sulfuric acid markets for commodity pricing platform ICIS. (Source: bloomberg.com)
3. Three weeks into the war, the Iranian regime is signaling that it believes it is winning and has the power to impose a settlement on Washington that entrenches Tehran’s dominance of Middle East energy resources for decades to come. This attitude may prove to be a dangerous misreading of President Trump’s determination, or of Israel’s capacity to inflict strategic blows on the Islamic Republic’s surviving leadership and military capabilities. Trump and Israeli Prime Minister Benjamin Netanyahu have given mixed signals on how long the war would go on, as they try to talk markets down and keep Tehran guessing. Netanyahu said Thursday that the war would end “a lot faster than people think.” Trump said this week the U.S. would wrap up the conflict in the “near future” even as the Pentagon dispatched thousands of additional Marines to the Middle East. (Source: wsj.com)
4. Iran has successfully strangled the Persian Gulf, the most critical maritime route for energy supplies in the world. It hasn’t yet prevented its foes from using a workaround that runs through the Red Sea. That could change if the Houthis get involved. The U.S. and its partners in the Middle East are keeping a close eye on the Yemeni militant group which—armed and funded by Iran—crippled shipping through the Red Sea for much of two years. The Houthis have recently stepped up threatening rhetoric that has caught officials’ attention. While they haven’t started shooting yet, the militants are an important lever for Iran, if it decides to further squeeze the global economy or expand its targets to Saudi Arabia and nearby U.S. assets, such as a base in Djibouti. (Source: wsj.com)
