CNBC reports:

The U.S. war against Iran has triggered the largest oil supply disruption in history, more than double the previous record set during the Middle East crisis of the 1950s, according to an analysis by consulting firm Rapidan Energy.

About 20% of the world’s oil supply has been disrupted for nine days now as tanker traffic through the Strait of Hormuz remains at a standstill. Crude prices have surged above $100 per barrel in response.

The biggest disruption before the current war was during the Suez Crisis of 1956 when Britain, France and Israel invaded Egypt’s Sinai Peninsula, the energy consulting firm told clients in a Sunday note. In that crisis, about 10% of the world’s oil supply at the time was disrupted.

The disruption triggered by the closure of the Strait is nearly three times the size of the shock caused by the Arab oil embargo of 1973, Rapidan analysts told clients. The Arab embargo disrupted about 7% of global supplies.

The big difference between the supply shock of the Iran war and past crises is the world has no spare oil capacity to address the problem, the analysts said. Saudi Arabia and the United Arab Emirates hold the overwhelming majority of swing capacity but they have been cut off from the global oil market by the Hormuz closure, the analysts said.

“The conflict has not only taken offline a historically high share of global supply – it has simultaneously disrupted the primary holders of spare capacity,” the Rapidan analysts said. “The result is a market with no meaningful cushion. There is no swing producer positioned to step in.”

This means that the global oil market will need to balance by destroying demand through sharply rising oil prices, the analysts said. The U.S. Strategic Petroleum Reserve is “finite and insufficient to fully offset” the supply bottled into the Persian Gulf due to the closure of Hormuz, they said. [Continue reading…]

The Washington Post reports:

The cost of shipping goods by air from Asia to Europe is up 45 percent since the war began, more than twice the increase for sending items from Asia to the United States, said Ryan Petersen, chief executive of Flexport, a freight forwarder and logistics company in San Francisco.

The shipping impact illustrates a broader economic truth: The war is hitting the economies of Europe and Asia harder and faster than it is striking the United States.

“Europe and Asia are heavily dependent on energy imports, so that alone makes them more vulnerable to negative macroeconomic spillovers from the Iran war,” said Maurice Obstfeld, former chief economist for the International Monetary Fund. “Being closer geographically to the hostilities also makes Europe and Asia more vulnerable to shock waves from the war.”

That does not mean Americans will escape unscathed. Gasoline prices now average $3.41 a gallon, up from $2.98 one week ago, according to AAA. Farmers face higher bills for critical crop nutrients, and additional supply chain headaches are certain if the Iran conflict continues longer than the Trump administration anticipates.

But for now, economies such as Italy, Belgium, China, India and South Korea, which are the most dependent on oil and gas shipments through the Strait of Hormuz, are feeling some of the worst effects. In February, inflation in the euro zone came in hotter than expected, and war-related energy bills are likely to make it worse. With QatarEnergy’s liquefied natural gas production shut down following Iranian attacks, European and Asian customers could be forced into a “bidding war” for available gas supplies, said TS Lombard in London. [Continue reading…]