If You Thought the Inflation Outlook Was Bad Before...

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I have no insights into how the war with Iran will unfold—in common with the people in charge, apparently—nor am I an expert in commodity markets. But it does not take much expertise to see that any sustained reduction in exports from the Gulf will be painful.According to the latest Statistical Review of World Energy, about 20% of all liquefied natural gas (LNG) exports in 2024 came from Qatar, mostly going to East Asia. About a third of all crude oil exported in 2024 came from Iraq, Kuwait, Saudi Arabia,1 and the United Arab Emirates (UAE). Similarly, about 18% of global exports of refined petroleum products also came from those four countries.As of this writing, those exports have more or less stopped. From Lloyd’s List:Without the ability to export, storage facilities for crude are filling rapidly, and some producers have already responded by slashing output. The problem is not just that the Strait of Hormuz is unsafe for tanker traffic, but that much of the infrastructure for extracting, storing, refining, and exporting fossil fuels from the Gulf is currently under attack from Iranian drones and missiles. The longer the fighting lasts, the harder it will be to restore production and exports to pre-war levels.So far, spot crude oil prices are up about 50% since the start of the year, and up around 25% as of this writing since the start of the conflict. That relative calm may reflect ample inventories in the major consuming societies plus, possibly, a temporary reduction of Chinese stockpiling. (Or it might just be a mistake.) Gas and refined products are harder to store,…