Many investors believe the energy crisis will soon correct itself. The S&P 500 remains within 10% of its all-time highs. Wall Street banks continue to price in a “diplomatic de-escalation” scenario in which a backchannel deal allows for a humanitarian corridor through the Strait of Hormuz. On Friday, Iran exempted Iraq from its shipping restrictions, potentially releasing 3 million barrels per day of Iraqi crude. A French container ship crossed the Strait this week, the first Western European vessel to do so since the war began. The White House says Trump is “confident the strait will be open very soon.”
But dozens of oil and gas traders, executives, and shippers say that neither small individual nor large institutional investors have grasped the severity of the situation. “Investors believe that the Strait will be opened and Trump will prevail,” said the Carlyle Group’s Jeff Currie in a recent conversation with energy analyst Amrita Sen, “even though nobody’s articulated a plan of how they’re going to open it.”
The Strait of Hormuz normally carries about 20 million barrels per day, roughly a fifth of all the oil the world consumes. Iran can use cheap drones, floating mines, and missiles sent from long distances to attack oil tankers that defy its effective blockade.
