Key Markets report for Monday, 9 March 2026
Alex Krainer
President
Trump’s war of choice against Iran has focused the world’s attention on
the strategic importance of the region, like nobody’s ever seen before.
Even
casual consumers of the news flow knew that a large chunk of the global
oil supply passes through the Strait of Hormuz and that any disruption
to maritime traffic there would send the oil price soaring well into
triple digits.
They weren’t wrong: in December, Brent crude oil
price dropped below $60/bbl. This morning, it’s trading at $107 - a 95%
increase in three months’ time! But this oil shock is only the most
direct and obvious disruption from this war.
The ripple effects from the Persian Gulf
The
closure of Hormuz will cause severe disruptions in many other markets
which will have severe social and political consequences for Western
nations by undermining their very economic foundations. Let’s consider a
few examples:
Qatar supplies about a fifth of the global demand
for liquified natural gas (LNG) . Since the war started on 28 February,
Qatar’s exports collapsed to zero. As a result, the Baltic LNG index
shot up by over 500% in the last week alone. But the ripple effects will
be felt worldwide. Taiwan, for example, relies on LNG imports for
electricity production. Nearly 9% of Taiwan’s electricity feeds TSMC
chip production, which could be disrupted if Taiwan burns through its
remaining ten days of LNG reserves. That may not happen in the short
term, but the price paid for LNG will certainly soar.
Take
sulfuric acid: it is the single most produced chemical in the world.
Among other things, it is essential in extraction and refining of copper
and cobalt. More than 90% of the world’s sulfur is produced through the
oil refining process. The Middle Eastern war has not only reduced the
world oil supply by up to 20 million barrels a day, the warring parties
are busy blowing up each other’s oil refineries and with them, their
output of sulfur. This will disrupt the production chains that include
essential products like transformers, batteries and electronic
components found inside every computer, data server and electronic
device.
The most frightening disruption from Hormuz could affect
global food production. Today, about a third of the global nitrogen
fertilizer feedstock flows through Hormuz. This disruption could result
in lower yields for many important agricultural staples, leading to
soaring food prices and famine in many parts of the world. Famine is the
driving force behind revolutions and in this sense, Europe could be
among the most vulnerable regions of the world.
The EU has been
the world’s undisputed champion of stupid when it comes to strategic
thinking and forward-looking economic policy. They have zealously
pursued net zero policies, severely curtailing the EU’s own energy
production. Thinking much too highly of themselves and their values,
they could not accept the unworthy Russian hydrocarbons. Instead, the
Eurocrats have pushed for energy “independence” from Russia, relying
more heavily on the U.S. and Qatar as suppliers of LNG.
Europe: headed for a famine?
The
EU has also been pushing for a wholesale closure of chemical fertilizer
plants across Europe, and with it the destruction of agricultural
production. We are not at famine stages yet, but as a bit of a “foodie,”
I couldn’t help noticing that even before the effects of the Iran war
could impact local agriculture, supermarkets in France have carried less
and less food, particularly the healthy, quality foods.
The
quantity and choice are down very considerably from what we had before
Covid lockdowns, and the prices have doubled and for some items more
than doubled. If these trends continue, the old continent could be in
serious trouble, the kind that nobody is really prepared for.
Unfortunately,
it does look like those trends will continue since the whole EU
bureaucratic apparatus doesn’t seem to have a reverse gear. War in the
Middle East or no war in the Middle East, we have our directives, our
incentives haven’t changed and we carry on destroying farms and ruining
farmers.
Stirring the pot in the Balkans
In
addition, social tensions are being deliberately enflamed to create
chaos. In Croatia, for example, the Israeli ambassador is demanding that
Croatia cut diplomatic relations with Iran. President Zoran Milanovic
firmly rejected this and called the Israeli ambassador for a meeting,
demanding that Israel refrain from meddling in Croatia’s policies.
Almost
the next day, the public domain started to become inundated with a
barrage of attacks against the President and fear mongering about the
Iranian “sleeper cells” that are about to go rogue and start a campaign
of terrorist attacks. Obviously, if that doesn’t produce the desired
effect, real terrorist attacks might follow, which will result in real
fear and polarization of society.
Croatia is a small country but
it is a member of the NATO alliance and an important element in the
Balkan powder keg. If detonated, that powder keg could lead to yet
another cascade of wars in the Balkans. In the past, destabilizing the
Balkans gave us the devastation of World War I. Certain interests in
this world clearly desire chaos at this point. It will take strong,
concerted collective action to douse the flames of war.