Citrini Research Analyzes Complex Dynamics in the Strait of Hormuz
Citrini Research has released a field report on the Strait of Hormuz, highlighting the intricate dynamics at play in the region. According to BlockBeats, the report was compiled by a multilingual analyst who conducted an on-site assessment to evaluate the current situation.
The analyst from Citrini Research advises investors to abandon binary thinking of 'open/close' regarding the Strait, as the reality is more nuanced. The region is experiencing a mix of military tensions and commercial diplomacy, with traffic expected to gradually increase despite ongoing conflicts. The situation cannot be simply categorized as 'conflict escalation/de-escalation' or 'strait open/close.' While the U.S. is engaged in military operations, its allies, including France, Japan, and Greece, are negotiating navigation rights with Iran, reflecting a multipolar world.
Iran has established a functional navigation checkpoint between Qeshm Island and Larak Island, directing approved traffic through its territorial waters instead of traditional routes. Vessels or their countries communicate with Iran through intermediaries, providing ownership, cargo, and crew information, and paying transit fees. Approved ships receive a confirmation code and are escorted through, while unapproved ones wait.
The analyst notes that Iran aims to establish a sovereign system similar to Turkey's management of the Bosphorus Strait, controlling navigation and collecting fees while allowing commercial traffic, positioning itself as a responsible global trade manager and isolating the U.S.
While some demand Iran open the Strait without fees and face military action, a complete closure would lead to a global economic disaster, with current global commercial crude oil inventory losses estimated at 10.6 million barrels per day. Most countries, including China, India, Russia, Japan, France, and Malaysia, are opting to negotiate with Iran to secure their energy supplies.
The analyst predicts that while conflicts persist, traffic through the Strait will increase, primarily involving LPG ships and small tankers, with fewer VLCCs. This will not prevent a global economic collision but is preferable to a complete closure. Iran is also restraining Houthi actions in the Red Sea/Mandeb Strait, using it as a potential escalation card.
Regardless of the Strait's status, freight rates will remain high, and tanker stocks may not have peaked. The Federal Reserve might anticipate the conflict's impact, potentially advancing rate cut expectations earlier than currently priced by the market, with room for further expansion of this 'advance' expectation.
