In this article
Taken from CNBC’s Daily Open, our international markets newsletter — Subscribe today
Global oil markets got a theoretical safety valve Wednesday when the International Energy Agency agreed to release a record 400 million barrels of oil, while the U.S. said it would tap 172 million barrels from its Strategic Petroleum Reserve to help lower energy costs.
Still, markets were not exactly reassured. Crude prices closed more than 4% higher Wednesday, while U.S. markets ended mixed after several commercial vessels were attacked off Iran’s coast. At least three cargo ships were struck by suspected projectiles as of Wednesday morning local time in or near the Strait of Hormuz, causing one of them to catch fire and forcing the crew to evacuate. European markets also settled lower Wednesday, while U.S. stock futures slipped.
Oil is only part of the story. The closure of the Strait of Hormuz has also disrupted fertilizer shipments since late last month, raising the risk of higher agricultural costs and, eventually, food inflation. More than one-third of globally traded fertilizer passes through the Strait, making it a critical passageway for agricultural supply chains. The timing is critical because fertilizers are applied early in the crop cycle and help determine yields later in the year. With other commodities like aluminum taking a hit, the Middle East conflict could further damage supply chains and become a tipping point for the global economy.
