During the Iran conflict or war, the global press was focused on the Straits of Hormuz and its connection to oil. There were plenty of good reasons because the oil tankers load up oil from 6 countries and 20% of the world’s oil flows through the Straits. The Straits are 33 miles across at its narrowest point. But there are other concerns.

In an article from Reuters, Jeremy Nixon CEO of container carrier Ocean Network Express said about 100 of the 750 ships that were backed up are container ships. This is about 10% of the container ship global fleet.

One of the reasons is over the past decade, the UAE and other countries have tried to diversify their economies from oil and gas, at least a little, and countries such as UAE has gone into logistics and container ports. The oil and gas revenues allow for generous economic incentives for global shipping companies to set up and operate in the country and companies have open facilities.

With the war continuing, the large shipping companies such as ONE (Ocean Network Express) and MSC have stopped booking cargo to the Middle East.

Around the Strait of Hormuz, Iran has 6 naval bases, the US uses Bahrain as the HQ of the 5th fleet. President Trump has said the US Navy will provide cover for ships going through the Straits and the US International Development Finance Corporation (DFC) which the US uses to buy critical minerals will add providing marine insurance to its portfolio.

In terms oil and gas, Basil Karatzas of Karatzas Marine Advisors & Co said the waterway bears one quarter of the world’s seaborne oil. 80% of the crude is destined for Asia with China the biggest customer. The rest goes to Europe and India. In terms of LNG or liquefied natural gas, Qatar and United Arab Emirates or UAE ship almost all their product through the strait accounting for 20% of all global supplies.

In terms of alternatives to the Persian Gulf, Saudi Arabia and the UAE have pipelines that could take some of the oil, but Iran, Iraq, Kuwait, Qatar and Bahrain rely of the waterway for almost all their energy products.

Linking to dividend paying stocks, when war happens across the world, logistics matter. For global companies, finding the least expensive place to do logistics is a key, but all these companies have backups or Plan B and C. The smaller the company, the less options there are because options have a cost associated with it. One of the reasons you want to invest in the larger companies is they have options, if they do not then it is time to find alternatives.

There are more questions than answers, till the next time – to raising questions.