Everyone Eventually Runs Out Of Patience

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On Wednesday, Zero Hedge posted an update on what is happening in Iran and the Strait of Hormuz.

The article reports:

  • US strikes on Iran announced, as ‘heavy costs’ for earlier targeting of multiple commercial vessels
  • Oil rises as Treasury revokes June 21 Iran oil waiver
  • Hormuz Threat Level Raised To “Severe” 
  • Three maritime incidents reported on Hormuz in last 24 hours 
  • Another unidentified vessel hit by a Drone
  • IRGC forces hit a Saudi Tanker 
  • IRGC forces hit a Qatari LNG tanker

These are the actions of a cornered animal fighting for its life.

The article concludes with a summary of the impact of the current situation:

Diplomatic Developments

• Iran’s Foreign Minister Abbas Araghchi warned on Tuesday that negotiations on a final deal will not commence if threats continue, referencing a memorandum of understanding with the US

• Iranian President Masoud Pezeshkian will travel to Iraq on Tuesday to attend funeral processions for former Supreme Leader Ali Khamenei, scheduled for Wednesday in Najaf and Karbala

Market Impact

• European natural gas prices surged as much as 6% on Tuesday, the most in a month, following the attacks on ships in the Strait of Hormuz

• Oil prices climbed on Tuesday, with Brent trading near $73 a barrel, as the attacks highlighted continued risks to vessels in the critical waterway

• Gold fell for a second day on Tuesday, dropping as much as 1.2% to below $4,120 an ounce, as the Hormuz attacks rekindled inflation concerns

• France lowered its 2026 GDP growth forecast to 0.7% from 0.9%, citing the Middle East conflict as a factor holding back output

Oil Trade Developments

• India’s state-run refiners are in talks with traders marketing Iranian crude and preparing to buy barrels if the US extends waivers beyond August or eases restrictions

• Two supertankers hauling Saudi crude are heading to the US for the first time since February, following the reopening of the Strait of Hormuz

• Russia’s Urals crude price averaged $41.66 a barrel at western ports in early July, falling to pre-Iran war levels and less than half the level during the height of oil market turmoil in April

There are a lot of moving parts here.

For instance, according to Artificial Intelligence (AI):

To understand the price of oil needed to sustain the Russian economy today, consider the following factors:

    1. Budget Breakeven: The Russian government requires oil prices to be around $40-$50 per barrel to balance its budget.
    2. Economic Stability: Prices above $60 per barrel are generally needed for economic stability and growth.
    3. Inflation Control: Higher oil prices help manage inflation and support the ruble’s value.
    4. Social Spending: Sustaining social programs and pensions often requires oil prices to exceed $70 per barrel.
    5. Global Market Influence: Fluctuations in global oil demand and geopolitical tensions can impact the necessary price for sustainability.
    6. Long-term Investments: To fund future projects and infrastructure, prices above $80 per barrel are preferable.

Russia is an ally of Iran. Russia needs high energy prices to sustain its economy. Did Russia play a role in encouraging the attacks in the Strait of Hormuz?