It seems that US President Donald Trump’s variable attitude towards Iran has caused significant fluctuations in global markets in the last month. While the cryptocurrency market is also facing harsh price movements in parallel with these developments, uncertainties for investors are increasing day by day.
Strait of Hormuz crisis and emergency stock move
There was a serious decrease in maritime traffic in the Strait of Hormuz, one of the world’s most critical energy transit points, after the conflict with Iran. This strait carries approximately 20 percent of global seaborne oil. With Iran declaring the strait “indefinitely closed”, the risk perception in the global energy market increased rapidly.
After the hostilities began on February 28, tanker crossings came to a near halt. For the first time in its history, the International Energy Agency (IEA) decided to release approximately 400 million barrels of emergency oil stocks from 32 member countries, with such broad coordination. Later, this amount was increased to 426 million barrels with the participation of more countries.
These additional reserves act as a buffer against the 4.5-5 million barrels per day deficit caused by the restriction of transit through Hormuz. However, it is stated that existing reserves can only compensate for the lack of supply in the market for a few more weeks. Then, the daily deficit could double to 10–11 million barrels.
Impacts on markets and crypto assets
This threat to oil supply creates an environment where sharp sales can be seen in risky assets. “Saudi Arabia stated that such a supply shock would be on an unprecedented scale and that there was no buffer left in the market that could be absorbed.
“There no longer appears to be an equilibrium point from which to cope with a shock of this magnitude.”
The rapid increase in ship insurance premiums by insurance companies has also increased maritime transportation costs significantly. Premium rates, which were less than 1 percent of the pre-war ship value, rose to as high as 7.5 percent in some cases. This caused, for example, the insurance cost of a tanker worth 100 million dollars, which was around 250 thousand dollars before the war, to reach 2 to 3 million dollars during the conflict.
Insurance premiums stand out as the clearest indicator of the risk on the route. As long as premiums do not fall below 2 percent, the instability in the region is expected to be reflected in the markets.
Although Trump has argued from time to time that safe passage through Hormuz can be achieved, no significant improvement in tanker traffic has been detected so far. According to data from S&P Global Market Intelligence, while more than 100 tankers were passing through per day after the war, this number dropped to only 21.
It is emphasized that a significant increase in maritime traffic is essential for risk appetite to return to the market. In the current situation, it is considered that volatility will continue in both crypto and traditional financial markets.
