War With Iran Could Trigger the Next Oil Shock

War With Iran Could Trigger the Next Oil Shock By Nick Giambruno for Casey Research

Today, the chances of a war with Iran are higher than ever…

And if it does happen, it will have tremendous consequences for the price of oil.

You see, about a year ago, I warned readers of my newsletter, The Casey Report, that the next big war in the Middle East was coming. And I showed them why it would focus on Iran.

The momentum in the Middle East has turned in favor of Iran. It won’t surrender its strategic gains. It’s unthinkable.

But the U.S. finds an empowered Iran intolerable. And it isn’t going to sit back and do nothing, either.

That’s why the possibility of a major regional conflict… which would be a catalyst for oil… is so high right now.

Let me explain…

Tensions Flaring

First, you should understand how this all started… and why it’s all happening around a key waterway in the Middle East named the Strait of Hormuz.

Things have been heating up around the Strait. Six oil tankers were attacked near the Strait and the Persian Gulf, and the U.S. government blamed Iran.

Iran then shot down a $120 million U.S. drone. It claims the drone was flying in its airspace.

In response, Trump approved airstrikes against Iranian targets. It would have started a full-scale war… but Trump pulled back at the last minute.

And those are just a few of the skirmishes that are now making headlines. In short, tensions between the U.S. and Iran are flaring.

But Iran holds a powerful card… because it controls the Strait.

Oil’s Most Important Chokepoint

The Strait is a narrow strip of water that links the Persian Gulf to the rest of the world. It’s the most important oil chokepoint in the world.

Five of the world’s top 10 oil-producing countries – Saudi Arabia, Iran, Iraq, the United Arab Emirates, and Kuwait – border the Persian Gulf. The Strait of Hormuz is their only sea route to the open ocean… and world markets.

Every day, nearly 19 million barrels of oil pass through the Strait of Hormuz. That translates into roughly 33% of the world’s oil traded by sea. It’s over $1.2 billion in value every single day.

That’s part of the reason why big Middle East wars are often catastrophic for global oil supplies. After all, almost 40% of global oil exports comes from the Middle East. Take a look:

Chart

As you can see, shutting down the Strait is Iran’s most powerful option in this conflict. And the investment implications are huge…

The Next Oil Shock

If Iran shuts down the Strait of Hormuz, it would cause the largest oil supply shock the world has ever seen. Take a look:

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