Impact of Hormuz Strait Situation on Oil Market
Written by Emily J. Thompson, Senior Investment Analyst
Updated: 2 hours ago
0mins
Source: CNBC
- Control of Hormuz Strait: Iran's control over the Strait of Hormuz poses risks for Western commercial vessels, potentially reducing oil and gas exports to 60% to 70% of pre-war levels, which will have long-term implications for the global energy market.
- Historic Supply Disruption: Iran's blockade of Hormuz has triggered the largest oil supply disruption in history, forcing the U.S. to seek a deal to address the growing threat to the global economy, highlighting the profound impact of geopolitical factors on energy supply chains.
- Lessons from Red Sea Crisis: The crisis in the Red Sea illustrates how geopolitical instability can lead to prolonged disruptions at trade chokepoints, and the situation in Hormuz may mirror this, requiring shipowners to assess future security guarantees.
- Development of Alternative Routes: The UAE is accelerating the construction of a second pipeline bypassing Hormuz, expected to be operational by 2027; however, Hormuz's significance in the global energy market will persist, especially in the absence of alternative shipping routes.
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Analyst Views on SPGI
Wall Street analysts forecast SPGI stock price to rise
15 Analyst Rating
14 Buy
1 Hold
0 Sell
Strong Buy
Current: 417.680
Low
546.00
Averages
617.77
High
675.00
Current: 417.680
Low
546.00
Averages
617.77
High
675.00
About SPGI
S&P Global Inc. provides essential intelligence. Its operations consist of five businesses: S&P Global Market Intelligence (Market Intelligence), S&P Global Ratings (Ratings), S&P Global Commodity Insights (Commodity Insights), S&P Global Mobility (Mobility) and S&P Dow Jones Indices (Indices). Market Intelligence is a global provider of multi-asset-class data and analytics integrated with purpose-built workflow solutions. Ratings is an independent provider of credit ratings, research, and analytics, offering investors and other market participants information, ratings and benchmarks. Commodity Insights is an independent provider of information and benchmark prices for the commodity and energy markets. Mobility is a provider of solutions serving the full automotive value chain, including vehicle manufacturers and retailers. Indices is a global index provider that maintains a variety of valuation and index benchmarks for investment advisors, wealth managers and institutional investors.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
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- Control of Hormuz Strait: Iran's control over the Strait of Hormuz poses risks for Western commercial vessels, potentially reducing oil and gas exports to 60% to 70% of pre-war levels, which will have long-term implications for the global energy market.
- Historic Supply Disruption: Iran's blockade of Hormuz has triggered the largest oil supply disruption in history, forcing the U.S. to seek a deal to address the growing threat to the global economy, highlighting the profound impact of geopolitical factors on energy supply chains.
- Lessons from Red Sea Crisis: The crisis in the Red Sea illustrates how geopolitical instability can lead to prolonged disruptions at trade chokepoints, and the situation in Hormuz may mirror this, requiring shipowners to assess future security guarantees.
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- Control of Hormuz Strait: Iran's control over the Strait of Hormuz poses risks for Western commercial vessels, potentially reducing oil and gas exports to 60% to 70% of pre-war levels, which will have long-term implications for the global energy market.
- Historic Supply Disruption: Iran's blockade of Hormuz has triggered the largest oil supply disruption in history, forcing the U.S. to seek a deal to address the growing threat to the global economy, highlighting the profound impact of geopolitical factors on energy supply chains.
- Lessons from Red Sea Crisis: The crisis in the Red Sea illustrates how geopolitical instability can lead to prolonged disruptions at trade chokepoints, and the situation in Hormuz may mirror this, requiring shipowners to assess future security guarantees.
- Development of Alternative Routes: The UAE is accelerating the construction of a second pipeline bypassing Hormuz, expected to be operational by 2027; however, Hormuz's significance in the global energy market will persist, especially in the absence of alternative shipping routes.
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- Berkshire Hathaway: 26% of the trust's investments are in Berkshire Hathaway, a company with a market cap exceeding $1 trillion, providing robust financial support to the foundation through its diversified operations and consistent cash flow generation.
- Waste Management: 20% of the trust is invested in Waste Management, which not only maintains a strong position in waste collection but also shows growth potential in renewable energy and healthcare waste disposal, despite its stock performance being lackluster.
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- Foundation Donations: Since 2000, the Gates Foundation has donated approximately $8.5 billion to 1,472 grantees, highlighting its significant impact on global philanthropy, although its investment decisions are managed separately from charitable activities.
- Portfolio Structure: As of the first quarter, the Gates Foundation Trust had over $31.6 billion in assets, with 63% invested in just three large-cap stocks, reflecting a preference for stable and mature companies, particularly Berkshire Hathaway.
- Role of Berkshire Hathaway: As the largest stock in the portfolio, Berkshire Hathaway boasts a market cap exceeding $1 trillion, showcasing its advantages in wealth preservation and growth, despite not growing as rapidly as pure-play AI companies.
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- Spin-off Completion: FedEx Corporation anticipates completing the spin-off of FedEx Freight on the same date, ensuring that the parent company remains in the DJTA, thereby maintaining its market position.
- Index Impact Analysis: The Dow Jones Transportation Average is a price-weighted index, where low-priced stocks have an immaterial impact, and this change may attract more investor focus on FedEx Freight's future performance.
- Market Reaction Expectations: With FedEx Freight becoming part of the Dow Jones Transportation Average, it is expected to enhance its market recognition, potentially leading to a positive impact on its stock price and further boosting investor confidence.
See More
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