General
A Naval Officer's Perspective on the Iran Conflict
I'm going to intentionally stay apolitical in this post other than saying three facts:
the IRGC is a brutal autocratic regime,
the power for the US to declare War is in Article I of the Constitution - it is a power of Congress, and
the intentional killing of any noncombatant is unacceptably wrong and a War Crime.
Ok, now that that's out of the way, let's talk about how insanely important the Straight of Hormuz is, and what we can do to protect ourselves, and find opportunity as fear may about to enter the market.
What is the Strait of Hormuz?
The Middle East is the world's foremost oil-producing region, its waterways a critical thoroughfare for maritime trade.
That is particularly true of the Strait of Hormuz, which handles a fifth of the world's oil trade - or 21 million barrels a day.
The strait is a narrow passage that leads from the Persian Gulf into the Gulf of Oman and onto the Arabian Sea and the Indian Ocean.
At it's most narrow point, it is only 24 miles wide
A Prolonged Shutdown of the Canal would be bad for everyone
This probably isn't news to anyone reading this, but the Middle East produces a lot of the world's oil.
Countries on the opposite side of the Persian Gulf to Iran, including the UAE, Kuwait, Bahrain and Qatar - produce a significant portion of the world's oil.
And yet the strait is the only way tankers carrying their oil can access the rest of the world, making it one of the most strategically important choke points in global trade.
Blockades in the strait could push oil prices above $100 (£74) per barrel, Goldman Sachs analysts have previously predicted.
Currently, prices are below $70/barrel.
According to the International Monetary Fund, inflation in advanced economies rises by about 0.4 percentage points for every 10% increase in oil prices.
(we've seen this movie before, more on that later)
Could Iran close the Straight of Hormuz?
Maybe, but the US Navy and her Allies will certainly try to prevent this.
Analysts have said in multiple unclassified reports that Iran has developed a "considerable array" of capabililities to close off the Straight, including sea mines, UAS, and more.
We've been here before
So what can you do about this?
Back in 1980s, when the Straight of Hormuz last closed, Buffett wrote extensively on how to combat the resultant inflation (hint: purchasing power)
That'll be the subject of my next post! I gotta write some code for the site... there's a bug where we can't change the Forum topic :-/
Would love any Flanker to read the letters (1980 letter is particularly good for the subject) so we can have a great dialogue!