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Stock Market Insights: Oil, fertilizer and the new desert trade routes around Iran

Dr. Richard Baker, AIF®, is the CEO and executive wealth advisor at Fervent Wealth Management.

 

I have been singing in my head, “East bound and down, loaded up and truckin'” for a few days now, as the continued closing of the Strait of Hormuz has led some companies to create interesting solutions. It looks more and more like a “Smokey and the Bandit” situation.


Iran, which has become increasingly annoyed by the U.S. Navy blockade of its ports, is expanding the area where it says ships can’t sail in without permission. This is prompting companies and energy organizations to get creative about moving products around an active bully. Many companies are opting to use trucks to transport their products to other ships across the Arabian Peninsula, utilizing some of the world's oldest trade routes.


For instance, the UAE, which sits across the Persian Gulf from Iran, has ports on both sides of the Strait of Hormuz bottleneck that are seeing huge increases in truck traffic around the bottleneck to load beyond the reach of the Iranian drones. Fertilizer is being offloaded in Saudi Arabia and shipped by land from the Persian Gulf to Red Sea ports. They were seeing 100 trucks a day before the war; now, over 7,000 trucks per day.


Shipping fertilizer over a huge landmass will never be as cheap or efficient as shipping by sea, but it is starting to lessen the global fertilizer shortage. These team drivers are driving twenty-four hours nonstop and will continue until things are settled. Saudi Arabia has several north/south railroad lines but few east/west. The building of new rail lines to connect the Persian Gulf to the Red Sea is being explored as insurance against Iran or other sea trolls.


Additionally, the U.S. Energy Information Administration (EIA) recently said it anticipates the Strait of Hormuz will remain closed through the end of May. This led the organization to announce the release of more than 53 million barrels of oil from the U.S. Strategic Petroleum Reserve. This is on top of the International Energy Agency’s (IEA) 400 million barrels of crude from its emergency reserves, all in hopes of lowering fuel prices. Just like the truckers won’t fully bring down the fertilizer prices, these barrels of oil won’t bring fuel prices back down to prewar levels, but they will help some.


The Strait of Hormuz is the easiest way to transport products out of the Gulf, but it isn’t the only way. They just need Jerry Reed and his basset hound, Fred, to take control of things. Or maybe add Sally Field (wowzer in 1977), Burt Reynolds, and their 1977 Pontiac Firebird Trans Am driving up and down the coast to distract the Iranians while more ships start sailing through the strait.


“We gonna do what they say can't be done. We’ve got a long way to go and a short time to get there. I'm east bound, just watch ol' Bandit run!’


Have a blessed week.

 

 

This article was written by humans for humans because AI doesn’t have this quality of sarcasm.

 

Securities and advisory services offered through LPL Financial, a registered investment advisor, Member FINRA/SIPC. Opinions voiced above are for general information only and not intended as specific advice or recommendations for any person. All performance cited is historical and is no guarantee of future results. All indices are unmanaged and may not be invested directly.

 

All investing involves risk, including loss of principal. No strategy assures success or protects against loss. The economic forecast outlined in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful.

 

 

Fervent Wealth Management is a financial management and services entity in Springfield, Missouri.

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