Daily update
Daily update
- Media reports suggest a China-owned tanker is attempting the Strait of Hormuz run (impressive, but can it do the Kessel run in 12 parsecs?). This defies the reported US naval blockade, and will be considered a test of whether US policy has any leverage with Iran. Commodity traders are looking on the bright side of life, interpreting US President Trump’s comments as signaling a willingness to talk.
- The Financial Times notes that the last tankers to leave the Gulf before Iran closed the Strait are now unloading fuel. This steps up the economic cost of war, with physical shortages a possibility where reserves are limited. Constrained supply requires rationing of demand—and the price mechanism is one obvious rationing mechanism (impacting all oil consumers participating in a free market).
- US March producer price data will show the early price effects on inflation. This is not likely to constrain margins as the costs are likely to be passed to consumers. Early warnings of second-round effects (which are what competent central banks care about) are less visible here—it is wages and retailers’ margins that reveal that.
- China’s March export data was distorted by the late lunar new year holiday. Strong import growth has the scent of oil about it.