Bread & Circus

The new Fed chairman confirmation hearing took place yesterday, and as expected was highly politicized and lacked real substance. The Trump’s “sock puppet”, as senator Warren described Mr Warsh, will in all likelihood be confirmed. While the Washington circus was on, the situation in Iran continues to change every few hours. Blockade on/off, attacks on/off, rhetorics on/off. Another circus. These distractions may have the final objective of making the market numb to the real threat: the global oil market is being disrupted, and the consequences are deep, beyond oil (fertilizers, drugs, chips, etc) and global. In the table below you can see that since the beggining of the Iran war, 11 power plants, refineries and oil plants have suffered “accidents”. Even if Hormuz fully opens tomorrow, which is unlikely, the oil infrastructure has been affected and will need some time to come back in full. The U.S. is placing itself as the solution selling oil temporarily to those countries in need, but that’s not a long term solution. In Europe, and particularly in the UK, thousands of flights are being cancelled because there is not enough kerosene for planes. The conflict is revealing winners and losers, way beyond the war zone. And it seems Europe is in the second group. China seems to be in the first one. When will the markets discover this days and wha will be the adjustment?

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