Trump Bets Economic Pain Will Finally Force Iran to Reopen Strait The administration hopes pressure on Iran’s oil industry will increase the longer the blockade endures
(…) U.S. officials said Thursday that the blockade, initially focused on ships headed to and from Iranian ports, would expand to cover all so-called shadow-fleet vessels that serve Iran’s oil exports. The Pentagon said it was prepared to board those ships wherever they are in the world. (…)
In as little as two to three weeks, Iran could hit a moment known in industry parlance as reaching “tank tops”—essentially running out of room to store the oil it is pumping out of the ground—according to Vortexa, Kpler and Energy Aspects, which track the industry.
Data on the exact size of Tehran’s oil facilities is opaque, and other analysts have suggested Iran could have more flexibility.
Iran’s response to the blockade has so far been muted. It is possible that Tehran feels it can absorb the pain of a prolonged oil shutdown, just as it withstood the military assault and the killings of its top leaders. (…)
Under what the administration calls Economic Fury—an echo of the broader Operation Epic Fury—the Treasury Department said this week that it wouldn’t renew a short-term oil waiver allowing the sale of sanctioned Iranian oil expiring Sunday.
The department also targeted an illicit oil-smuggling network run by Iran’s elite, sanctioning more than two dozen people, companies and vessels. The Treasury threatened sanctions against global banks aiding Tehran.
The U.S. blockade applies to “all ships, regardless of nationality, heading into or from Iranian ports,” Gen. Dan Caine, chairman of the Joint Chiefs, said Thursday. The operation would pursue any Iranian-flagged vessel or any vessel attempting to provide material support to Iran, he said. (…)
Tankers that make it through the blockade can still be loaded, even if they remain trapped in the Gulf, stretching Iran’s tank-tops deadline. Satellite imagery showed three tankers capable of carrying 5 million barrels of oil loading on Kharg Island, Iran’s oil export hub, according to TankerTrackers.com, a research firm.
Iran also has roughly 160 million barrels of Iranian oil already loaded on tankers at sea, Vortexa estimates. Some of it floats outside the Gulf near buyers in Asia, allowing Iran to sell oil for weeks even if it starts cutting production. (…)
Iranian onshore storage—with a capacity of up to 120 million barrels—is currently over half full. At current export rates, that space would be exhausted in less than three weeks, Bronze said.
If those tanks top out, Tehran will be forced to shut in active wells—a drastic measure risking permanent infrastructure damage. (…)
Windward:
U.S. Central Command has confirmed that at least eight Iran-linked oil tankers have been intercepted since the start of the blockade. In each case, vessels were contacted via radio and instructed to reverse course, with full compliance and no need for boarding actions.
The blockade is being enforced against vessels of all nationalities entering or departing Iranian ports, with U.S. forces maintaining maritime superiority and actively monitoring compliance. More than 15 warships and additional personnel have been deployed to support enforcement.
This confirms that the blockade is operational rather than decelerative, with early-stage enforcement already altering vessel behavior without escalation.
Iranian oil exports remain structurally active, despite the enforcement environment.
As of April 15, approximately 153.7 million barrels of Iranian oil are on the water, with 84.9% destined for China. Average daily export volumes from Kharg Island between February and April remain elevated at approximately 2.04 million barrels per day.
Satellite and AIS analysis confirms at least two VLCC departures from Kharg Island immediately surrounding the start of the blockade. Two Iranian-flagged VLCCs, each loaded with approximately 2.01 million barrels, are bound for Dongjiakou, China.
These patterns confirm that Iranian export flows remain active, supported by both physical loading and deceptive shipping practices. (…)
These observations confirm continued reliance on dark operations, fraudulent flagging, and concentrated loading activity to sustain export flows. (…)
The operating environment is defined by active enforcement alongside ongoing evasion and selective continuation of maritime trade, with pressure building across both physical and financial domains.
But who’s economic pain?
- Imminent energy shortages in parts of the world and for the rest, significantly higher prices. The battle for the physical barrel has begun. (@ericnuttall)
(…) “In April, there is nothing,” Birol said last month. “The loss of oil in April will be twice the loss of oil in March. On top of that you have LNG and others. It will come through to inflation, I think it will cut economic growth in many countries, especially emerging economies. In many countries the rationing of energy may be coming soon.” (…)
(…) Trump said it may not be necessary to renew an April 7 truce with the Islamic Republic before it expires next week, defying expectations that an extension will be needed to allow more time for diplomacy.
“Iran wants to make a deal. They are willing to do things today that they weren’t willing to do two months ago,” the president told reporters on Thursday. “We have a very successful negotiation going on right now. If it happens, it will be announced fairly soon.”
Some leaders in Arab states in the Persian Gulf and Europe expect it will take about six months to agree to a peace accord and that the ceasefire should be extended to cover that period, according to officials familiar with the matter, who asked not to be identified discussing private talks. That’s in part to allow for a reopening of the critical Strait of Hormuz waterway, they said.
Iran has yet to comment on Trump’s claims that Tehran has made concessions, including over the key issue of its nuclear program. The US leader reiterated that the Islamic Republic “will not have nuclear weapons,” and pushed back against suggestions that a fixed-term moratorium on uranium enrichment is up for negotiation. (…)
“They’ve agreed to almost everything,” Trump said. “They got to get to the table with a pen.”
Comments from both Iranian and US officials on Thursday suggest the sides remain far apart on key issues, but the ceasefire with Lebanon could provide fresh momentum. Iran’s Parliament Speaker Mohammad Bagher Ghalibaf, who took part in the Pakistan talks, had earlier said a permanent ceasefire must cover the fighting in Lebanon.
The Middle East crisis has been ongoing for too long to leave no mark on the global economy
Too many essential raw materials have therefore been stuck in the Persian Gulf for too long for global growth not to be affected in some way. Starting with oil, whose production has been reduced by about 13 million barrels per day since the start of hostilities—the equivalent of about 15% of global production. Unsurprisingly, OPEC countries have been hit the hardest, recording a record drop in production in March.
While this decline certainly led to a rise in crude oil prices, the worst case scenario has not materialized—at least not yet. In fact, benchmark prices have even fallen in recent days. It should be noted, however, that the futures contracts most closely watched to track oil price movements do not necessarily reflect the full extent of current supply issues. Indeed, the significant backwardation currently characterizing oil markets forces buyers seeking immediate delivery to pay a premium over these futures contracts.
Combined with rising transportation costs, this spread has put pressure on refiners’ profitability, prompting many to cut production. This shortfall, exacerbated by a decline in production capacity in the Middle East itself—due to attacks on certain refining sites or a shortage of inputs—and by already low international inventory levels prior to the start of the conflict, has resulted in a much sharper rise in the price of refined products since the crisis began.
Several other raw materials, whose importance to the proper functioning of the global economy is far from negligible, also depend on the free flow of maritime traffic through the Strait of Hormuz. These include other energy products, such as natural gas; essential raw materials, such as helium and aluminum; fertilizers such as sulfur, ammonia, and urea; and petrochemicals indispensable for the manufacture of plastics, such as naphtha, polyethylene, polypropylene,
and methanol. Difficulties in supplying these products could eventually put upward pressure on consumer prices worldwide. (…)Geographically speaking, Asian and European countries are likely to be hit hardest, given their heavy reliance on energy exports from the Middle East. (…)
Data centre delays threaten to choke AI expansion Almost 40% of such builds in US risk hold-ups, including projects tied to Microsoft and OpenAI
Delays to a swath of new US data centres threaten to slow the rollout of AI by the world’s biggest tech companies, with almost 40 per cent of all projects due this year at risk of falling behind schedule.
Major projects for Microsoft, OpenAI and other tech groups are likely to miss completion dates by more than three months, according to data shared with the FT by SynMax, a satellite and AI analytics group.
More than a dozen industry executives said campuses targeting hundreds of megawatts are being held up by permitting hurdles and chronic shortages of labour, power and equipment.
The bottlenecks are emerging as a key constraint on how quickly companies can turn vast spending on AI into revenue, raising concerns that billions in planned investment will take longer than expected to generate returns.
Hyperscalers are racing to build ever-larger data centres, pushing to bring facilities online that will draw at least 1 gigawatt of electricity — roughly a nuclear reactor’s output. (…)
OpenAI said: “Our historic data centre build-out is on schedule and we will accelerate from here. In partnership with Oracle, SB Energy and a broader ecosystem of partners, we are delivering rapid progress in Abilene, Shackelford County and Milam County in Texas.”
Oracle said: “Each data centre we’re developing for OpenAI is moving forward on time, and construction is proceeding according to plan.”
SB Energy said: “The Milam County Data Center is on schedule and on pace to be one of the fastest data centres of its kind ever delivered.” (…)
Satellite imagery shows land cleared for six planned facilities, but as of early April only one showed signs of development. SynMax estimates the earliest possible delivery date for the first building is December, while a timetable in line with most comparable projects would push it out to late 2027.
Other OpenAI-linked campuses also appear to be progressing slowly. In Milam County, Texas, where Greg Brockman last month said a 1.2GW site was “taking shape”, satellite imagery shows construction has begun on only one facility. Of the group’s major Texas projects, only one in Abilene is expected to complete this year. (…)
Two construction executives working on OpenAI-linked projects said there were not enough specialist workers, from electricians to pipe fitters, to meet demand across the build-out as companies race to construct clusters of increasingly large and complex facilities.
Strained grid capacity and shortages of equipment such as gas turbines and transformers are also causing delays. Remote locations are pushing labour costs up as much as 30 per cent, they added. (…)
Nebius said: “All capacity tranches under our agreement with Microsoft to date have been delivered on time, and we currently expect to deliver the remaining tranches on schedule. As of now we are not aware of issues that would materially affect this.”
SynMax estimates more than 60 per cent of projects scheduled for next year have yet to begin construction, adding to concerns over delays to the industry’s expansion pipeline. (…)
FYI:
- “Weekly initial unemployment insurance claims continue to confirm that layoffs remain historically low. For the week ended April 11, they fell 11,000 to 207,000. Continuing claims edged up slightly to 1,818,000, but the four-week moving average declined to its lowest reading since June 2024, suggesting that hiring activity may actually be improving. That would not surprise us because corporate profits is at a record high. Profitable companies tend to increase their payrolls.” (Ed Yardeni)
China to Commission Seven Nuclear Reactors in 2026, CCTV Says
Seven nuclear power reactors are scheduled to be completed and commissioned in China this year, state broadcaster China Central Television reported, citing the nation’s atomic energy organization’s annual report.
China currently operates 60 commercial nuclear reactors, with 36 units under construction — including two that started this year — the world’s largest build-out, according to the report.
The government last month set a goal of 110 gigawatts of nuclear capacity by 2030 in its latest five-year plan draft, a 76% jump from the end of last year. The lofty target underscores the priority Chinese leaders have placed on the around-the-clock reliability of nuclear’s carbon-free electricity.
Small Business Checkpoint: One shock after another
Bank of America aggregated credit and debit card data shows gasoline spending per small business client rose 23% YoY in March – the strongest increase in several years – after declining over the previous two months. (…)
In Bank of America small business payments data, small wholesalers’ costs associated with inventory (i.e. distributors, truck/freight logistics and other delivery services) surged 62.6% YoY in March – the single largest monthly gain since the start of our data series in 2020.
This surge is echoed in the latest NFIB report, with the number of owners planning inventory investment in the coming months reaching the lowest level since May 2024. Additionally, of the small cohort of firms who pay tariffs directly, these payments were up almost 95% from the 2024 average level in March.
One silver lining may be that these payments are starting to fall, and, according to BofA Global Research, lower tariff rates following the Supreme Court’s reversal of tariffs imposed with the International Emergency Economic Powers Act are helping offset some of the pain at the pump. Still, compared to large companies, smaller firms are unlikely to feel relief in the near-term.
Payroll payments growth per small business client remained negative in March, marking three consecutive months of declines – the first such result in our series since 2021.
During this week’s earnings call, BofA CEO Brian Moynihan said that “BofA customers spent 6% more via credit and debit cards in the first quarter than they did in the same period a year earlier, reflecting a degree of confidence in their financial standing”, a statement relayed by several media and pundits. His CFO added that “Our data continues to tell us that the American consumer remains resilient.”
Three observations FYI:
- Gasoline prices exploded 40% in March. Nearly 60% of Americans use their credit card for fuel, around 40% use debit cards.
- In March, excluding higher gasoline spending, the MoM rise in total spending was a modest 0.1%, before inflation.
- YoY comps are upwardly biased against very weak spending 12 months ago, particularly on discretionary categories.
Unilever hikes price of Hellmann’s mayonnaise as suppliers try to offset rising fuel costs
Multinational food and packaged-goods conglomerate Unilever PLC is applying a 9-per-cent increase in the price it charges retailers for its Hellmann’s mayonnaise – another signal that soaring fuel costs are putting pressure on grocery prices.
The Anglo-Dutch company sent a notice to retailers late last week, saying the price hike – which will take effect in early July – reflects a “significant increase” in its costs. (…)
These conversations between suppliers and grocers are not just happening in Canada, said Henry Chambers, senior vice-president with Sentinel Management Consultants, a strategic advisory and commercial capability training firm that works with food suppliers around the world. “This is everywhere,” he said, as rising fuel costs have global effects, “… all the manufacturers have been hit.” (…)
Peter Chapman, founder of consulting firm SKUFood, said the impact of rising fuel costs might already be showing up in some grocery prices. Fresh produce, for example, operates under a pricing model in which increases in input costs such as fuel are incorporated almost immediately into prices, rather than being negotiated separately.
“It’s not $25 plus a fuel surcharge … it’s just broccoli this week costs $27,” he said. “The fresher it is, the sooner you’re going to see the change.”
- Downplaying fears about higher prices stemming from the war in Iran, he derided inflation as “fake” and said the war “is going along swimmingly,” (Bloomberg)