Military conflicts combine with climate constraints to impede navigation across the globe

Since early March a previously obscure waterway between Iran and Oman that very few people could name has become the subject of daily reporting around the world after Iran closed it as a response to the attack on Iran by the United States and Israel. The Strait of Hormuz, which remains closed to most ships, is now known around the world as the transit point for 20 percent of the world's oil and high percentages of key materials including fertilizers such as ammonia (23 percent), urea (34 percent) and phosphate (20 percent), helium (30 percent), and sulfur (24 percent), all of which are derived from or are co-products of oil or natural gas except phosphate.

On the other side of the Arabian peninsula, a long-festering conflict between Ansar Allah (which controls part of Yemen) and Saudi Arabia has escalated. Not surprisingly, Ansar Allah, also known as the Houthis, have resorted to a tactic used previously in the conflict. They have closed the Bab el-Mandeb Strait near their the territory to Saudi vessels.

The strait connects Red Sea shippers with ocean-going routes to Asia. This includes ships coming through the Suez Canal on the northern end of the Red Sea. The Houthis say that commercial shippers not serving Saudi Arabia may continue using the strait, but many have chosen to avoid it as the Houthis attack Saudi ships. In practice this means primarily a prohibition on Saudi oil tankers which carry Saudi Arabia's main export. For now, the Saudi ships are taking a trip around Africa to reach Asia despite the added costs. But the Houthis have shown they can hit Saudi ports on the Red Sea and could escalate to shut down even this traffic.

As U.S. oil and refined product exports soar, will the Trump administration impose an export ban?

The U.S. oil industry got a scare last week. News reports say that the Trump administration may be considering an export ban on crude oil and refined petroleum products such as gasoline and diesel in order to bring those prices down—prices which have been elevated considerably by the reduction of oil supplies worldwide in the wake of the Iran war. But, a Trump administration spokesperson said the administration has no plans to ban exports of oil or natural gas products.

It's important to note that there is an old adage in Washington, D.C.: "Nothing is true until it is officially denied." The administration has probably discussed such a ban. Whether it will implement one is the question. With exports of distillate fuels (which include diesel and fuel oil) hitting the highest on record and gasoline exports bouncing between about 750,000 and 1 million barrels per day, American consumers may be wondering why the administration doesn't act now.

The answer is complex as I detailed in my piece in May entitled "Will the U. S. curtail oil exports as fuel prices rise?" But the short version is two-fold:

The Iran war is a monkey trap for the United States

A monkey trap offers a reward such as food that when grasped makes the hand too large to withdraw from the hole in the trap giving access to that food. Unless the monkey lets go, the animal is stuck. Now, the obvious choice when danger arrives is to simply let go and run. But, supposedly, monkeys won't let go even as human hunters approach and then club them to death.

The war with Iran has become the Trump administration's monkey trap; potential victory over Iran is the prize in the trap. Strangely, the only prize now available is something that was already available before the war started: freedom of transit through the Strait of Hormuz. But now that Iran has seized control of the strait and effectively closed it to unfriendly traffic, that seizure has become the most important leverage Iran has over the United States and its allies.

As long as the war continues, Iran says there will be no shipments of oil, natural gas, petrochemicals, helium, fertilizers and other key commodities except for its own and a few select shipments from friends of the regime. Since these shipments make up substantial fractions of the world's supplies, closure of the strait has sent prices of these products skyward with shortages already appearing in many places across the globe.