Strait Risk and Soaring Futures: Impact of the Israel-Iran War

With the markets only trading electronically today for the Holiday, it is still finding a way to tack on about $.06 to the ULSD futures.  We currently sit almost $.60 higher than the first of the month, all on the heels of the Israel-Iran War.  It is not a conflict, skirmish, retaliation, or incident.  Both sides are sending missiles.  This has a tremendous affect on the energy market as key countries lay in between the two nations.  Saudi Arabia, Kuwait, Qatar, U.E.A, Iraq, Jordan, along with Syria, all are in the crosshairs of what could be collateral damage should a misfire occur.  Additionally, the Persia Gulf and the key oil shipping chokepoint at the Strait of Hormuz, a vulnerable 21 mile wide pass that sees 20 million Barrels a day go through and is an easy target for attack, takeover or closure.  Two tankers collided just south of the Strait on Tuesday.  It was reported that shipping rates have increased almost 60% overnight in the area.  While the US currently is not directly involved, it is unclear if we will join the party as we “may or may not” accept Israel invitation.  By doing so, it may ultimately lead to a larger conflict.  Also need to think of what’s next…..  if Iran’s nuclear ability is taken out, how long does it take to rebuild?  They have plenty of desert area to test a crude atomic weapon, quickly.  It will take some time for this increase to get peeled off, the risk premium is still very high.  “It’s amazing what the hard times can reveal, like who shows up, who walks away, and who’s for real” (coveted DKB hoodie to first who names artist)  It might be a rough summer with the potential for tight rack supply, but not to worry with DKB.  Our physical inventory on hand and ability to deliver has never been stronger.  We are here and for real.