The Daily View: The difference between lights on and lights off

THE speech delivered by Abu Dhabi National Oil Company’s exasperated chief executive at the CeraWeek conference in Houston this week offered an instructive insight into the difficult decisions being made across global supply chains right now.

“No country should be allowed to hold Hormuz hostage. Not now. Not ever,” stormed Sultan al-Jaber.

“This is not a supply issue; it is a security issue. And it has only one durable answer, keeping the strait open,” said Jaber. “We cannot trade our way out of this crisis.”

The speech was received warmly by energy executives who understandably share his deep concerns regarding the weaponisation of the Strait of Hormuz.

But as he was delivering it, a second ADNOC product tanker was completing its transit of the strait, highlighting the reality of what Jaber was talking about.

Decisions still need to be taken and some are still prepared to move ships through the strait despite the risks.

Transits remain dominated by the Iranian fleet, but ADNOC is one of the few companies who are now starting to find a way through. In the past week just three transits have taken place where the ships had no Iranian nexus.

Jaber’s speech made clear that stability in energy markets underpins stability in every market. Energy security is not just a slogan — it’s the difference between lights on and lights off.

But it is not just energy. The Iran conflict is increasingly spilling over into global fertiliser markets.

Middle East Gulf producers play a central role in global nitrogen fertiliser trade, and disruptions to shipping through the Strait of Hormuz — also a key corridor for fertiliser and feedstock flows — are tightening global supply.

Prices for key fertiliser products have already moved sharply higher.

Since the onset of the Iran conflict, urea and ammonia prices have risen by roughly 50% and 20% respectively, according to the latest data from Alpine Macro.

Sustained disruption risks amplifying pressure on agricultural markets. Farmers in the Northern Hemisphere are entering the spring planting season facing elevated input costs and uncertainty, raising the risk of lower application rates, weaker yields, and, ultimately, higher food inflation.

Much of the oxygen of the global economy runs through a single throat that is being choked, was Jaber’s headline-grabbing quote.

He’s not wrong.

In just three weeks the price of oil has risen 50%, slowing economic growth in a way that is now being felt from factories to farms.

The world’s central banks are trapped by the same strait: the Fed cannot cut, the ECB is hiking, the BOJ is tightening. Six countries are rationing fuel. Japan’s 10-year yield hit a 27-year high. Slovenia has QR codes at the pump to determine which cars are allowed to fill up. South Korea is barring government vehicles from operating one day per week.

And behind all of it, 400 ships wait outside a five-nautical mile channel for a clearance code from the IRGC Navy.

Richard Meade
Editor-in-chief, Lloyd’s List

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