Commentary: Big Tent Ideas

Iran War’s Shockwaves Haven’t Fully Arrived Just Yet. But They’re Coming.

Unsplash/hosein charbaghi

Shipping through the Strait of Hormuz has been at a virtual standstill for two months now. In response, oil prices spiked, tanker rates skyrocketed and “experts” have claimed Wall Street has priced it all into the financial markets.

But what exactly has been “priced in” on the major indexes? To many, it appears the answer is higher oil prices, but only on the assumption – as J.P. Morgan said this week  — that Hormuz traffic is back to full flows by June 1.

Just a couple of problems there:

• June 1 is three weeks away, and no deal between the U.S. and Iran seems to be in the offing.
• The oil supply shock is but one of several cascading shocks created by the halt of flows from the Persian Gulf.

Here’s what traders haven’t priced in yet: the cascading supply shocks in helium, fertilizer feedstocks and the semiconductor industry that powers everything from your smartphone to the data centers running AI. These aren’t myths or narratives, but foundational vulnerabilities tied directly to the same chokepoint everyone claims to understand.

Let’s start with helium, a critical industrial input extracted as a byproduct of natural gas processing. Qatar, sitting on one of the world’s largest natural gas fields, supplied roughly 30% of global helium output prior to March 1, but had to shut down its main industrial facilities after they were hit by Iranian missiles.

Among an array of other industrial applications, helium is vital to the semiconductor industry, where it serves as a process gas for cooling, leak detection and creating inert atmospheres during wafer fabrication to prevent defects. Thus, a supply shock in helium supply represents a looming supply shock in semiconductor manufacturing.

Before the Iran Conflict began, South Korea, home to Samsung and SK Hynix, sourced about 65% of its helium imports from Qatar. Unfortunately, no quick substitute is available. Helium’s unique properties make alternatives impractical in the near term.

Next up is a supply shock in fertilizer feedstocks. Nitrogen fertilizers like urea and ammonia stimulate about half the world’s crops using an energy-intensive process which depends on natural gas.

Again, before March 1, Persian Gulf countries accounted for around 36% of global urea exports and roughly 29-30% of ammonia exports, with up to 30% of global seaborne fertilizer trade moving through the Strait of Hormuz.

Saudi Arabia, Qatar the UAE and others leverage cheap local gas to dominate these exports. When flows stop, importing nations like India, Brazil, African countries and elsewhere face shortages and skyrocketing input costs. A wave of fertilizer plant closings has been recorded over the last two months across the Middle East and Asia due to lack of these feedstocks.

This reality hits planting and harvest seasons hard, especially in import-dependent regions, and has the potential to drive food inflation and worsen hunger in vulnerable areas while squeezing farm margins everywhere. Energy policy that ignores these linkages isn’t serious. Traders and analysts who ignore them aren’t really pricing in the whole picture.

Then there’s the semiconductor industry’s double exposure, particularly in Asia. Manufacturers in South Korea and Taiwan are voracious consumers of reliable power, much of it from LNG, with Qatar a key supplier.

With Persian Gulf LNG blocked, Asian spot prices have surged, driving up electricity costs for these energy-hungry facilities at a time when demand for advanced chips for AI, memory, EVs and defense remains insatiable. Any prolonged disruption threatens yields and output.

South Korea produces a massive share of the world’s memory chips. Taiwan’s TSMC dominates foundry work. Disruptions here don’t just delay manufacturing, they ripple through global supply chains for cars, consumer electronics, data centers and military systems.

This crisis underscores the risks involved in over-reliance on concentrated, geopolitically risky supply chains like those which originate in the Persian Gulf region. It also underscores the pressing need for countries like Qatar, Saudi Arabia, Kuwait, and the UAE to invest in alternatives to the Strait of Hormuz for getting their products out to the global market.

Where financial markets are concerned, pricing in the impacts from the oil supply shock was the easy part. The harder part will be pricing in the impacts from the array of additional shocks still to come.

David Blackmon is an energy writer and consultant based in Texas. He spent 40 years in the oil and gas business, where he specialized in public policy and communications.

The views and opinions expressed in this commentary are those of the author and do not reflect the official position of the Daily Caller News Foundation.