Comment – Buy Oil (this week)

Iran’s proposed live-firing naval exercises near the Strait of Hormuz have not disrupted oil shipments, but they have been enough to unsettle the market. As ever, it’s the risk rather than the reality that moves prices first.

The Strait remains one of the world’s most critical energy choke points, handling around a fifth of global oil flows. Any suggestion of military escalation quickly adds a geopolitical risk premium to crude prices, and recent moves above $70 per barrel reflect exactly that. Even without a single tanker being delayed, markets are pricing in uncertainty.

For the agricultural machinery supply chain, the relevance is obvious. Higher or more volatile oil prices feed directly into diesel costs, transport charges, steel prices and component manufacturing, squeezing margins long before farmers feel it at the pump.

The key point is this: unless tensions escalate significantly, price rises may prove temporary. But once again, global geopolitics is reminding the machinery trade how exposed it remains to events far beyond the farm gate.

The editors take on this is on Monday  morning, ring round, get the prices and fill the tanks.

Have a good week.

Andy