00:00 Speaker A

sixth straight day now of conflict in the straight of Hormuz. The worrying developments today were twofold. The first of those is that attacks by both the US and Iran have been escalating past military infrastructure to actual civilian infrastructure. On the US side, we saw the US strike several bridges, critical road bridges inside Iran. We also saw them strike Bushe and the South of Iran, which is the city that houses the country’s only nuclear power plant. This is not the centrifuges that are enriching uranium, but the only nuclear power plant that’s providing electricity to people in the country. We saw that city get struck, raising concerns there about how that could affect the area, the electricity, whether President Trump will go forward with his threats to actually begin striking power plants and electricity infrastructure.

01:05 Speaker A

On the Iranian side, not only did they continue to strike US installations inside Kuwait, inside Bahrain, inside Jordan, but we saw news that a desalination plant, a water desalination plant in Kuwait had been struck. Now, the problem here is that the vast majority of the Middle East really relies on water desalination. These are desert, arid countries. They have to have clean drinking water. Those desalination plants are what provide that. If we were to see those get targeted, the worry is that that could spark a massive humanitarian crisis.

01:46 Speaker A

The second problem we saw pop up today is further west in the Red Sea. The worry with the Red Sea was always that the Houthis, this terrorist proxy force in Yemen, could close off what we call the Bab al-Mendeb straight. That goes from the Red Sea down into the Gulf of Aden and then out into the market. Saudi Arabia has managed to move around 5 million barrels per day of oil through a pipeline that runs from the east of the country in the Persian Gulf to the west to the Red Sea, load that onto tankers and bring that down through the Babo Mendeb.

02:18 Speaker A

The worry is that if the Houthis cut that off, the market loses its most important release valve right now. Now, it’s not confirmed what actually happened. There was a report from a maritime trade organization saying that a vessel was forcibly boarded. The details are very unclear, but it did start to spark these worries again.

02:41 Speaker B

What do you what do you think happens next in this trade and to traffic in this trade? Because I’m just curious what you think shippers are feeling right now. Like, do they think, you know what, it’s worth it? Or do they think, it’s not worth it even if I have this US escort.

03:00 Speaker A

This is moving day by day. Traffic has not stopped. We have seen it significantly slowed down in the last week, but it has not stopped. However, you are seeing signs of fear. We saw India telling some of its shippers, do not move. Do not attempt the crossing. We think it’s too dangerous. We’ve seen some ships try to make the run for it, and we’ve seen several ships get attacked in the straight by Iran, immediately raising that threat profile again.

03:36 Speaker A

Nobody I talk to thinks we’re going to see traffic drop to zero unless the picture rapidly deteriorates even even farther. But at the same time, this is a very complicated risk calculation for shippers, for ship owners, for companies. We’re kind of back to where we were in the beginning stages of the war. You are likely to see some smaller companies, higher risk tolerances, maybe some smaller Greek shipping companies try to make that run. But the big players here, they’re going to be concerned about insurance, they’re going to be concerned about safety, they’re going to be concerned about what happens to their vessels that not only are they carrying millions of dollars worth of cargo, but those are millions of dollars worth of vessels and equipment. That traffic will almost certainly be slower to come back. And if we see this get worse, could deteriorate even further, stretching the or I’m sorry, constricting the oil market even even further.