When Will It End?
Below is commentary from some of the topics covered in our latest Bespoke Report newsletter. Read the full report by subscribing below, or see the full PDF and more with a Bespoke Premium trial.
This week’s Bespoke Report was dominated by one story: the Iran war and its cascading effects on energy markets, global central banks, interest rates, and equities around the world. Spring is in the air, March Madness brackets are already busted, and Opening Day is just days away, but the markets aren’t sharing in the seasonal optimism.
The War in Iran: No End in Sight
The conflict entered a more dangerous phase to end last week. Israeli strikes against Iran’s South Pars gas field prompted Iranian retaliation across regional petroleum infrastructure, including a significant hit to Qatar’s Ras Laffan LNG export terminal that is expected to remove roughly 3% of global LNG capacity for up to five years. The Strait of Hormuz remains effectively closed to normal tanker traffic, with multiple vessels struck this week attempting to transit.
The fundamental disconnect driving this conflict is one of perception. Iran views this war as an existential threat to the survival of the regime. The US appears to view it as a regional foreign policy priority, not a fight to the finish. That gap in perceived stakes is a key reason why Hormuz remains closed with no credible off-ramp in sight.
Roughly 15% of global petroleum supply remains bottled up with no near-term resolution visible. Late Friday, headlines crossed suggesting the President is considering boots on the ground at Iran’s Kharg Island oil export hub, sending the VIX spiking into the close.
Energy: Refiners Are in Dreamland
Crude has settled into the mid-$90s range after going vertical when the war broke out, which raises a natural question: why isn’t oil higher? Part of the answer is a widening spread between US and global crude benchmarks. Traders have grown hesitant to book forward US crude cargoes given lingering uncertainty about a potential export ban, and logistical bottlenecks between Oklahoma and the Gulf Coast are compressing WTI prices relative to Brent.
The more important story right now is in refined products.
