Summary

• The extended closure of the Strait of Hormuz is pushing global oil inventories toward critical lows, where the market’s “balancing mechanism” could quickly give way to operational stress.
• Markets may be looking through the crisis because excess inventories, SPR releases, sanctioned barrels, and China’s strategic reserves could extend the runway before shortages become severe, but they do not.
• We are raising our energy overweight and modestly reducing our materials exposure, using energy stocks as a relatively inexpensive hedge against a surge in oil prices and the reality of.

By Sam Peters, CFA

Energy Shock Absorbers Under Strain

The extended closure of the Strait of Hormuz has created one of those rare moments in markets when something both knowable and important appears to be underappreciated. In this case, we know with

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