Rabobank’s Global Strategist Michael Every has shifted the bank’s base case scenario regarding the Iran conflict to anticipate a longer closure of the Strait of Hormuz, estimating the disruption could last between 2 to 4 weeks [1]. Every warns that the risk of escalation in the region is very high, which could result in further damage to energy supply chains [1]. The ongoing US economic blockade of Iran and Iran’s effective blockade of Hormuz have led to critical energy and goods not flowing, causing exponentially rising economic damage [1].
The United States has announced plans to intensify Operation ‘Economic Fury’ at sea and through sanctions, while Iran has stated it will attempt to break the blockade by force if it continues, raising the likelihood of further escalation [1]. Despite a US ceasefire extension, screen oil prices only softened slightly, but the price of physical oil and related products in Asia is expected to continue rising unless the Strait of Hormuz is reopened [1].
Every draws a parallel between the current situation and the 1956 Suez Crisis, suggesting that a true geopolitical realignment could have broad downside implications for multiple asset classes, not just energy [1]. He notes that if the situation evolves to leave Iran in control of Hormuz, it could be less bearish for energy markets, whereas an Israeli intervention to remove Iran from Hormuz would have a different impact [1]. Overall, the strategist emphasizes that markets have yet to fully price in the potential negative consequences across various asset classes [1].
CONCLUSION
Rabobank’s analysis highlights significant risks to global energy flows and asset markets due to the potential for a prolonged closure of the Strait of Hormuz and escalating geopolitical tensions. The bank expects continued upward pressure on physical oil prices in Asia and warns that broader market impacts may not yet be fully reflected. Investors should remain alert to further developments and possible market volatility.