What Happened
The Strait of Hormuz has been effectively closed since March 4. Tanker traffic is at zero. Trump extended his original two-day ultimatum from March 21, and no resolution is in sight. Ceasefire talks have not produced results. Brent is at $108, WTI at $106. The U.S. and 30+ IEA members are releasing 400 million barrels from strategic petroleum reserves — the largest coordinated release on record.
Our Judgment
The market is mispricing this.
60% probability scenario (our estimate): protracted negotiation that partially reopens the strait by late April with escort-only transit. 25% scenario: escalation — strikes on Iranian infrastructure followed by retaliatory mining that keeps the strait closed through May or longer. 15% scenario: rapid collapse of Iranian resistance and full reopening within two weeks. Current oil futures are pricing something between the first and third scenarios. They are not pricing the second.
The critical variable is not the ceasefire itself but the mid-April supply cliff. Strategic petroleum reserve releases and sanctions waivers have a shelf life — analysts estimate these measures lose effectiveness around April 19. If the strait is still closed after that date, the market loses 9-10 million barrels per day of effective supply — double the current 4.5-5 million bpd loss. That is not a disruption. That is a regime change in global energy markets.
Assets Affected
Crude oil. Brent below $115 is mispriced if the strait stays closed past mid-April. Physical delivery premiums in Asia are already running $12-15 above paper prices — a divergence that historically resolves upward. We expect Brent $130-150 in the escalation scenario.
Gold. Currently around $4,700, correcting from the $5,600 all-time high set in late January. Gold sold off because the war drove yields and the dollar higher — a mechanical headwind, not a fundamental one. Central bank buying (60 tonnes/month through early 2026) and the structural debasement trade have not changed. The correction is a buying window if your time horizon exceeds three months.
Fertilizer and industrial commodities. The strait handles approximately 45% of global sulfur, 30% of ammonia, and half of global urea exports. Urea prices are already rising sharply. Aluminum up modestly. These are the second-order effects that equity analysts have not started modeling into earnings estimates.
Chinese energy security plays. CNOOC, PetroChina, and domestic coal producers benefit from the structural shift toward non-Hormuz supply routes. China has signaled readiness to curb refined product exports to preserve domestic supply — a move that would tighten Asian product markets further.
What Our Trade Channels Say
Freight rates on non-Hormuz routes (West Africa to China, U.S. Gulf to Asia) have risen sharply over the past two weeks. More telling: war risk insurance premiums for the strait have gone from 0.125% to over 0.3% of hull value per transit — an increase that effectively makes the strait uninsurable for commercial operators even if it nominally reopens.
Physical traders in our network report that Asian refiners are beginning to contract U.S. and West African crude for May delivery at premiums that would have been unthinkable a month ago. The physical market is decoupling from paper. When that happens, paper catches up — not the other way around.