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Macroscope
Reopening Strait of Hormuz won’t fix world’s energy problems
As energy security becomes a more potent force, stress tests for countries vulnerable to supply disruptions are likely to become more severe
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Nicholas Spiro is a partner at Lauressa Advisory, a specialist London-based real estate and macroeconomic advisory firm.
It is easy to lose count of the number of times US President Donald Trump said he was close to a deal with Iran. The announcement on June 14 by both the United States and Iran of a preliminary agreement to end their nearly four-month war and reopen the Strait of Hormuz appears to be more credible.
Stock markets staged a relief rally while Brent crude, the international oil benchmark, has dropped to US$78 a barrel, only slightly above its level when the war erupted on February 28. There are still many unanswered questions given the lack of clarity on the reopening of the strait, particularly what restrictions will remain in place and who will regulate shipping traffic. However, it appears investors stopped worrying about the conflict in the Middle East some time ago.
Robin Brooks of the Brookings Institution said, “Both sides have an interest in ending this war permanently. That’s good and says oil prices should fall farther and faster.” Yet the 14-point memorandum of understanding, which is expected to be formally signed by Washington and Tehran in Geneva on June 19, looks more like an affirmation of the uncertainty and risks in energy markets.
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