The US-Iran war hits the two month mark.
Global economies are cracking under pressure in mid April, the head of the International Energy Agency saying that Europe only had 6 weeks or so of jet fuel left due to severe disruption in the Strait of Hormuz.
The officials saying it's the largest energy crisis the agency has ever faced as oil supplies remain cut off.
The crisis has already caused global gas prices to spike and is.
Having broader systemic supply impacts on products including fertilizers as well as semiconductors.
Joining me as we kick off a new trading week is Jeff Gitterman, Managing Director of Gitterman Asset Management.
Jeff, good morning.
Thank you so much for joining me on this Monday morning we are still looking at oil prices elevated WTI and both hovering around $100 a barrel, and the longer this effective blockade continues.
He moves, the more that impacts the global economy.
But what does this mean for investors?
You know, it's very interesting.
I don't want to say that we know for certain on everything.
What we do know is that there's a culmination of lots of supply issues impacting because of the strait that is already on top of pre-existing supply issues through the Russia-Ukraine war, post-COVID, deglobalization, decarbonization, climate risk.
These things are impacting supply chains, so we know that they are causing complications already, whether it's helium prices rising, aluminum prices rising, methane.
We're seeing lots of little parts of the system having trouble and prices rising.
We're already seeing higher inflation coming into the system.
So for investors it's a cautionary tale without a final outcome yet.
I think every day that it goes on, the risks increase geometrically, not linearly.
And we're also hearing from executives, management teams from major corporations, given the fact that it is earnings season, and there are concerns about how this crisis affects not just businesses as well as consumers, but what it means for the global economy in the long run, given the fact that there are other commodities that are Being held in the Strait of Hormuz.
So where do your concerns lie?
Our concerns lie in looking into the kind of minutia of things that aren't being paid attention to.
Obviously oil is a big choke point in the Strait of Hormuz, and we're seeing oil prices over $107 this morning, I think.
So we're seeing the impact of that already.
We're seeing airline ticket prices jump.
Tremendous some estimates are as high as 30 to 50% higher going into the biggest travel time of the year, Memorial Day weekend and other things coming up.
But then you start to dig down deeper and you start to look at helium.
Helium is needed in chip manufacturing.
It's needed in defense.
It's needed in space exploration.
It's kind of an irreplaceable commodity.
There's nothing that can replace helium, where other things have replaceable that might cost more money or might not be as efficacy, have the same efficacy, but helium doesn't.
Helium also leaks during storage, about 1% a day out of the barrel.
So even if you have supplies built up on helium, they're depleting even before you're using them.
And we're seeing supply shocks.
Qatar is the biggest supplier out of the Mideast.
US is the biggest overall supplier, but Qatar out of the Middle East and South Korea uses a lot of Middle East helium for chip manufacturing.
So we're seeing it all along the supply.
And it's this combination of everyone keeps just assuming this thing is going to be over tomorrow.
The markets have gotten very sanguine.
They seem to just be like, alright, it's going to end any day now so we don't have to price in any more risk.
I wouldn't be so comfortable with that analysis.
I'm not running for the hills and saying sell everything, but be careful what you own.
Think about what you own.
Think about where prices are being impacted right now.
Owning hard assets, Halo is a big thing that people talk about with hard assets, owning more of that leverage, that's not a bad play right now.
And Jeff, we have about 60 seconds here.
So give us your assessment of the infrastructure rebuild that will be taking place once and when this conflict ends.
I mean they're talking about 58 billion in just energy infrastructure across the Middle East that's been damaged 2 to 5 years for replacement.
What we think about is not just how off is the supply chain because of that lack of natural gas and oil that's coming into the market, but also what are the additional materials that are already in short supply that are needed for that.
We have SpaceX coming out with an IPO probably any day now.
They need more helium.
The chip manufacturing has priority.
Does that impact space exploration?
These are multi-stage impacts across a wide variety of different factors.
It takes a lot to examine it, and you want to be careful that you're not chasing something that has a lot of price constraints right now.
Jeff, a lot to keep our eyes on.
So thank you so much for joining us today and as always, thank you so much for sharing your perspective and insights.
Thanks for having me.
