Oil: Supply shock risk supports Dollar – BBH

Brown Brothers Harriman’s (BBH) Elias Haddad highlights that Brent crude Oil briefly moved back above $100 per barrel after tanker attacks near Iraq and Dubai, reviving stagflation concerns and pressuring bonds and equities. The bank notes the IEA’s 400 million barrel release only covers several weeks of disrupted Strait of Hormuz flows, leaving Oil-importing economies and global risk sentiment exposed.

Hormuz disruption fears drive Brent risk

"Doubts that the US and its allies can secure shipping through the crucial Strait of Hormuz are sending renewed jitters across global markets. Brent crude oil prices surged back briefly above $100 per barrel after two oil tankers were struck south of Basra, Iraq."

"The rebound in crude oil prices is weighing on bond and stock markets due to heightened stagflation risks and fiscal concerns. USD is holding near recent highs."

"The International Energy Agency (IEA) agreement to release a record 400 million barrel (mb) of crude oil from its strategic reserves will do little to offset the disruption to supply flowing through the Strait of Hormuz."

"Nearly 15 mb/d of crude oil passes through the Strait or 10mb/day assuming alternative routes are used to capacity. As such, the IEA oil stock release covers roughly 27 to 40 days of supply disruption."

"Most other economies are in the middle either because they are energy producers (US, Brazil, Australia) or have some fiscal flexibility (China, Sweden, Switzerland, New Zealand, UK, Eurozone, Chile, Peru). The EU is about to tap that fiscal lifeline as the European Commission is exploring price caps and subsidies to cushion the economy against higher energy costs."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)