Is the US-Iran financial war starting? Before the US stock market opens, Japan's crude oil inventories are depleted.

Iran

The war between Iran and the United States is no longer limited to trading missile fire; it has now moved one step further into a contest in the financial arena.

To stabilize financial markets, Trump has seized on various opportunities and pretexts to use the TACO trade to prop things up. However, after China’s stock market closed and before the U.S. stock market opened, Iran again denied that negotiations were under way and scheduled timed releases of negative news to the crude oil futures market and the U.S. financial market.

Why, after a month of a hot war, did the final landing point end up in the financial markets? And how much does the rise in oil prices affect the U.S.’s allies?

A carefully planned “time-gap” strike?

After China’s stock market closed on April 1, the Iranian parliament said that the Strait of Hormuz would not be opened. We have never held any negotiations, and in the future we will not.

It once again punctured the lie that Trump is negotiating with Iran. After the information was released, oil prices stopped falling, rebounded, and turned positive. This put some pressure on Trump’s TACO trade.

The U.S., which has just rebounded, may slide again because of this.

At the same time, a senior Iranian official urged Trump, saying that the Strait of Hormuz will certainly be opened in the future, but it will never be opened to the United States. This means that the ceasefire could be delayed again.

If the Strait of Hormuz is still under blockade, it will deal an even greater blow to the already tight international crude oil market. Nearly 10 million barrels of oil supply would already disappear.

The inventories of many oil-demanding countries are depleted to the point of exhaustion.

Data from the Petroleum Association of Japan (PAJ) shows that, as of March 28, Japan’s commercial inventories of gasoline, diesel, and kerosene have all been reduced to zero.

Just one month ago, Japan’s official authorities still claimed that its national strategic petroleum reserve was sufficient to support 254 days.

From the 254 days’ worth of crude oil reserves, Japan used it all up within one month—how could that not be another kind of humor?

Previously, there were reports that Japan’s crude oil reserves are not actually crude oil stored on Japanese soil. Rather, they include certain oil orders, and even positions in the crude oil futures market, in the total amount counted as crude oil reserves.

But after the outbreak of the Iran–U.S. war, there was no way for these oil shipments to be brought to Japan. Before the Strait of Hormuz was blocked, the oil that had been shipped out—after more than ten days of transit time and ten days of consumption time—had already been used up.

To obtain oil again, you must accept high-priced oil above $140.

With inventories depleted, having to accept high-priced oil would be a fatal blow to Japan’s economy.

It would not only directly hit people’s livelihoods and the economy. Gasoline prices would skyrocket, logistics costs would surge sharply, and factories would be forced to cut output or even shut down.

Now futures traders are betting that this crisis will be resolved soon, but they also know full well that the high risk premium has already been baked into the oil price.

The worst outcome of all this is that the foundation of the petrodollar system begins to loosen.

Over the past half-century, the United States used military security guarantees to enable oil producers such as Saudi Arabia to settle oil in U.S. dollars, forming an unbreakable “petrodollar” cycle.

Now the United States has not only failed to protect the security of its Gulf allies, but has also lost actual control over the Strait of Hormuz.

This crisis is far more than just a matter of whether oil prices go up or down.

Globalized supply chains that prioritize “efficiency first” are shifting toward one that prioritizes “security first.”

Japan and South Korea rely on the Middle East for more than 90% of their crude oil, and the vast majority must pass through the Strait of Hormuz.

Next, all major energy-importing countries will frantically look for alternative routes, increase strategic reserves, and even restart domestic energy. Europe will accelerate its embrace of renewable energy, and China will further strengthen its energy ties with Russia and Central Asia.

For global financial markets, this is not just a matter of TACO versus anti-TACO. The release of false information may only cause short-term price fluctuations, but it cannot increase crude oil supply.

Ultimately, who controls the pricing power of oil will depend on who can win this war—and under what circumstances the Strait of Hormuz is reopened.

Author statement: personal views, for reference only