Payden & Rygel: Tankers and gas carriers through the Strait of Hormuz
For financial markets, the most pressing issue arising from events in the Middle East is the flow (or disruption) of energy through the narrow Strait of Hormuz.
In the week before hostilities erupted, roughly 735 commercial vessels, including 210 tankers and gas carriers, transited the Strait. In the five days since the war began, ship traffic slowed to its lowest since 2020. Over 150 tankers are waiting outside the Strait, a container ship has already been hit, and two others have turned around.
It's little surprise that the price of Brent oil has spiked 17% as of Thursday's close, and European benchmark gas futures surged 59% after attacks on Qatari LNG facilities forced a production suspension. The ultimate macro impact will depend on the duration of the disruption. Days or weeks versus months and quarters?
Our main view is that the longer energy supply flow is restricted, the bigger the risk to global economic growth, rather than inflation. In particular, Asia and Europe would be more exposed than the U.S., which receives only about 2% of energy shipments through the Strait.