The Economics of Oil and the Strait of Hormuz !!

Regrets being off for a long time and am back to writing the blogs again ....

A quick note on a developing situation which could be the next Economic threat - The Strait Of Hormuz

The importance of the Strait is that its the lifeline of Seaborne oil trade with 35% shipments and 20% of the total traded oil going through it. The economies of large oil producing countries of the region depend on it for their livelihood.

If the strait gets blocked for some reason, it will have large implications on the price of oil and related effect on the world economy still under heavy stress in most regions.

The apparent back ground is the power equation between Israel & Iran....one a small but technologically advanced country and another a large oil player now at crossroads with US and some European powers.

At this point shadow boxing is going on between the US and Iran ....and any grave provocation can ignite it.
US has put effective sanctions against Iran , choking it and Iran has threatened to block the strait to retaliate. If not our oil , then no one ships oil. If it does, it will mean a certain retaliation from the US making it  messy with firing on/from all sides as Iran will involve Israel into the picture and that can be bad for everyone.

Minor achievements like downing of a top end US drone by Iran may have given them some bragging points but then how were they able to achieve it...possibly with some outside help of an interested country ...that must be giving them some sense of security and backing when under fire ....so there must be some other players coaching the unseeded Shadow boxer ..;))

Looks like people are waiting for Iran to fire the first shot and then blame it but the rescue of an Iranian Naval boat and its kidnapped crew may provide some elbow room for diplomacy...looks far fetched.

Though diplomacy should be the key to engage but then for some strategic reasons that isnt being deployed as yet ..hope its put to good use.


If the stand off erupts, Long Oil & Gold will be a great no brainer short term trade !