Iran war disrupts Hormuz shipping; crude exports surge 40%, inflation ripples across imports

The Iran war has become the dominant macro supply shock, with implications stretching far beyond energy stocks. The Strait of Hormuz has been effectively closed for non-sanctioned traffic for over two months, forcing tankers to take longer routes around Africa and Asia, adding 20-30 days to transit times. In response, the US Strategic Petroleum Reserve has been drawn down rapidly, with foreign-flagged tankers under US government waiver moving oil domestically and internationally.

The data reveal a paradox: 50% of released crude is being exported, not consumed domestically. This suggests the administration is using the SPR as a tactical tool to manage global energy prices while draining US reserves. Crude prices remain near $85-90/bbl, well above historical normals, and the dollar's correlation to oil prices is at the highest level in history. This creates a divergence: energy import inflationThe rate at which prices rise across an economy. is surging, pressuring headline CPI, while energy exporters (including US oil majors) enjoy elevated margins.

US import prices surged 0.5% in April on oil and fuel, the largest monthly move since 2022, signaling that consumer goods inflationThe rate at which prices rise across an economy. is being imported. Mortgage rates have not moved despite this inflation, suggesting the market believes the Fed will tolerate higher CPI on supply-side grounds. However, this tolerance has limits: Minneapolis Fed President Kashkari called inflation "too high," signaling discomfort even as the Fed maintains its cut bias. ECB's Stournaras warned that the central bank could be forced to hike if oil prices remain elevated.

The wildcards are (1) whether Hormuz eventually reopens and crude normalizes; (2) whether China's energy demand picks up on improved US relations, pushing prices higher; and (3) whether the SPR drawdownPeak-to-trough decline in portfolio value. eventually becomes politically contentious. Energy importers face margin compression; energy exporters and domestic oil producers benefit from elevated risk premiums.