The economy has Strait of Hormuz deadline for Trump: Two weeks

With oil prices With global trade supply chains shutting down in various sectors of the economy at levels not seen in years and the virtual closure of the Strait of Hormuz, senior executives’ belief that the worst is yet to come is being tested. on friday, United Airlines CEO Scott Kirby said he plans for $175 oil and the oil price to remain above $100 by 2027. That prediction may not come true, he said, but the airline CEO added that there is every reason to start planning for it, at least as a potential reality.

In recent years, company executives have become accustomed to a world of one uncertainty after another. But the potential consequences of the U.S.-Iran war, which President Donald Trump continues to offer vague timelines for ending, have the market and many of its top brass on edge. The Nasdaq entered a correction on Friday, the fourth consecutive negative week for the stock market, and it’s not just risky assets that fell, but also safe havens like gold and bonds.

The administration and the army are reacting. On Thursday, the army chief said the military was “hunting down and killing” the vessels Iran was using to choke traffic in the strait. President Trump’s threats regarding the Strait of Hormuz have intensified; Trump said on Saturday that Iran had 48 hours to reopen the Strait or the United States would shut down power plants in the country. Meanwhile, more U.S. allies have expressed willingness to support efforts to secure safe passage for ships, although no specific plans have been implemented. Trump also said Friday that the Strait of Hormuz “will need to be protected and controlled by other countries that use it when necessary, but the United States has not.”

For now, top executives have their own take on the matter: That’s roughly two weeks for the Trump administration and all allies involved in the effort to reopen the Strait of Hormuz; Otherwise, company executives will have to assume that the conflict will continue at least until mid-year, with all the negative consequences it will bring for the global economy. This was the result of a conversation among members of the CNBC CFO Council, with energy and commodity market expert John Kilduff of Again Capital joining the CFOs from within the trader and investor community to share his views on the oil price outlook.

It’s energy that could be said to be truly at war across sectors, and in a phone call Tuesday morning, an energy CFO (CFOs were granted anonymity to speak freely about discussions within their firms) said their company is planning three potentially different future scenarios: a reopening of the Strait of Hormuz by the end of March, a closure closer to the middle of the year or, in the worst-case scenario, extending into the end of the year. But the energy CFO acknowledged that it’s hard to get a good idea of ​​which scenario is more likely at this point, leaving the management team no choice but to “worry about what the worst thing that could happen here is.”

Concerns about the passage of time were also voiced by CFOs on the call from outside the energy industry. One tech industry CFO who participated in the call said that just because he doesn’t have to worry about the price of oil doesn’t mean his company doesn’t worry about the knock-on impact, and for a global business, that means pressure around the world, especially in the Middle East and emerging economies like Saudi Arabia, Dubai and the rest of the UAE. Although the tech sector CFO noted that his business is focused on enterprise sales, “consumer demand ultimately drives business demand, which will directly impact our business.”

“How long can this go on?” he asked.

Scenario planning in the energy company’s boardroom also matches the scenarios traders in the market are running, Kilduff said. ” [end of] The reopening of March that you mentioned; This is about two weeks later; “This is a huge window that we’re living in right now, partly because members of the military are now telling us they’re turning their attention to the Bosphorus,” he told the Energy CFO. “We don’t know where this is going to go, but certainly after April 1, if we look at this as something that will last until mid-year, that’s when you move into the next phase of repricing, which from my perspective is where we get well above $100 for WTI and start to worry about shortages, particularly in Asia,” he said.

Measures to support and protect oil supply are not sufficient

Announcements of strategic oil reserves from Japan to the US and the US’s ability to extract more than a million barrels of oil per day – which was in doubt just a few years ago – will help quell supply fears that emerged in the immediate aftermath of the Russia-Ukraine war. But Kilduff said this solution is too large to be effective for a long time. “That’s a deficit of 10 to 12 million barrels a day. … It’s really insurmountable. There are no policy measures that can be taken. There are no levers to compensate for that,” he said.

For this reason, he thinks that the time period to focus on is after April 1. “If there’s no solution, if there’s no plan, if there’s not even the slightest hope that we can reopen the Strait by recruiting troops or doing whatever the military needs to do to do it,” Kilduff said, “then it becomes an energy crisis.” “By mid-year you’ll see shortages in places like India, Japan and South Korea. They’ll start to rein in industrial production. They’ll literally have to save to keep the lights on,” he said. If the army and government do not respond positively by April 1, “Collapse is coming.”

If there’s any good news, Kilduff said, it’s that there’s less reason to worry about the United States right now.

Although there is already activity in the diesel market and diesel prices react much more sharply than crude oil and even gasoline, the market is still relatively well supplied in the short term. But even in the U.S. toward the end of the year, Kilduff said, “We’re going to be facing a major energy crisis. I think the shortages would definitely have reached California by then.”

He noted that policy measures such as tax-free holidays, which have been talked about so far to keep prices low at the pump level, are in a way almost perverse measures, because they are trying to support demand. “In a situation like this, we want to destroy the demand to keep the price stable, maybe even come back, because of how much of a problem this is for the consumer,” he said.

He said the oil market’s response would also be inadequate, given that around 20 million barrels per day would normally flow through the Strait of Hormuz and would be impossible to redirect through infrastructure such as the Saudi East-West Pipeline. While a total of up to 2 million barrels per day and 1 to 1.5 million barrels per day could reach ships via the pipeline, “none of these policy measures that we’re talking about can really address this situation,” Kilduff said.

There’s a reason WTI has a ceiling around $100, according to Kilduff, and Brent crude oil It “behaved pretty well” in the $105-$110 range on the upside. “Because this could resolve itself pretty quickly. … we’re sitting here on the edge of the cliff waiting to see if we can get one step higher. Because if this situation goes on for more than two weeks, we’re going to reprice the barrels of oil here pretty high,” he said.

Kilduff told CFOs that there is some truth to the claim that oil prices are rising. don’t cause so much damage It has hurt the U.S. economy the same way crude oil did in the 1970s because of our strong manufacturing position and the economy becoming less energy intensive. The US position is supported by the fact that most of the imported oil comes from Canada and that the US now has the newly “rediscovered” resource from Venezuela, which, unlike US shale oil, is well suited to the operations of Gulf Coast refineries. “If it weren’t for the US’s production position, these prices in the global market would be much, much higher. There are no two ways about it,” Kilduff said.

There are also plenty of floating tanks and other oil tanks in the world. In fact, when 2026 began, there was an oil glut starting to develop and is still being worked on at the moment, and this could mesh favorably with the military approach in terms of not prioritizing the strait first. But Kilduff added: “I think this also overlooks what direction inflation will be across the supply chain and what that will do to consumer confidence.”

$100 WTI oil price ‘floor’ could be set soon

Even if the situation in the Strait of Hormuz is resolved, there is every expectation in the market that the increased risk premium will remain in oil prices as other Middle Eastern countries halt production, facilities in the Middle East are damaged, and it will take some time to return production to previous levels. This timeline lengthens as damage to oil and gas operations increases. An Iranian attack that wiped out 17% of Qatar’s liquefied natural gas export capacity could take three to five years to fully repair, QatarEnergy’s chief executive told Reuters on Thursday.

If the United States or Israel strike more Iranian oil export facilities, Kilduff said, “I would expect them to asymmetrically go after oil production facilities in all surrounding countries with what they have left.” “The UAE is the closest and easiest country to hit. That’s why they’re doing this.”

Kilduff said, “This was one of the unknowns. What would Iran do in response? Would they go after their neighbors? Would they resemble what I call the ‘drowning man syndrome’, where when you go to save someone they take you with them? It looks like this for the Iranians, too. In fact, they want to take everyone down with them.” he said. “It’s clear the Iranians are trying to spread the pain, and it turns out they’re pretty good at it,” he added. “If you hear of Iran mounting a successful attack on any meaningful Saudi, Kuwaiti or Iraqi infrastructure, that price will soon rise to $20 a barrel. This is a ‘buy now, ask questions later’ mode for traders in the market.”

Even if the situation subsides, “This will be a very careful, gradual process,” Kilduff said. “Going back to the 70s or 60s becomes a more difficult journey because of the fundamentals and the still very developed risk environment,” he said.

But the next two weeks come first. “We’re on the verge of $100 as the new bottom here in the next week or two. Unless there’s meaningful progress on the security of the Strait, the benefit of the doubt will disappear from this market,” Kilduff said. “The loss of supply will start to affect you, it will start to bother you,” he added.

Kilduff said that with Trump and the army focusing on the Bosphorus recently, “now it will be a test for the market. Can we get out of this in the next two weeks? We are holding our breath.” “Choose your analogy, your metaphor. Are we like people in those disaster movies, looking at that big wave coming at us as if it’s before everything ends badly?”