The Israeli maritime embargo could reignite inflation and postpone rate hikes and temporarily remove an upside factor for bitcoin.
Yemeni piracy
The Red Sea is an artery of international trade. A good part of the cargoes of oil and natural gas coming from the Persian Gulf to Europe (and a little to North America) transit there.
Total oil shipments accounted for about 12% of total oil traded by sea in the first half of 2023. It was 8% for liquefied natural gas (LNG) shipments.
However, Yemen’s almost daily attacks against merchant shipping will continue until the Jewish state allows humanitarian aid to arrive in Gaza.
This week, 300 ships with a total capacity of 4.3 million containers have changed course or plan to do so to avoid the Red Sea. This represents approximately 18% of global shipping capacity.
Ali al-Qahoum, a member of the Ansarullah (Houthis) politburo, said any hostile action by the United States, Israel or other Western powers against the country would have disastrous consequences and would be very costly. Dear.
“The Houthis will not abandon the Palestinian cause, regardless of American, Israeli or Western threats”said Mr. al-Qahoum.
Drone attacks have already forced two of the largest shipping companies to circle Africa. This detour extends the trip by a good week and makes transport more expensive, which will ultimately cause inflation.
Yemeni threats are taken seriously in Europe which ultimately refused to send warships as part of the American naval operation Prosperity Guardian.
A French frigate has already been targeted, forcing it to respond with a missile a hundred times more expensive than the drone…
The Strait of Hormuz
On December 25, Israeli Prime Minister Netanyahu stated that “the war in the Gaza Strip will last a long time and there is no imminent end in sight.”
For his part, the commander of the Iranian Revolutionary Guards declared that the Israelis “will soon face the closure of the Mediterranean Sea, the Strait of Gibraltar and other waterways”.
Drones launched from Lebanon can effectively isolate the Israeli port of Haifa. This would be a total naval blockade of Israel.
If the United States decides to attack Yemen and/or Lebanon, the war will intensify to the point where not a single ship will transit the Red Sea.
“There is no danger for your ships which do not intend to go and support the Israelis.” »
Iran could also get involved by filtering ships passing through the Strait of Hormuz, through which 20% of world oil production passes. Nearly 50% of world exports by sea (more than 2,400 tankers) pass through it each year. Not to mention Qatari gas.
This would be a hard blow especially to the European economy given that the United States has recently become self-sufficient in oil and gas. Down the line, we could once again experience an extremely inflationary year if things get out of hand.
A blow from the BRICS
Along with Egypt, Ethiopia and Saudi Arabia, BRICS+ can disrupt global trade, not just in oil, but in just about everything.
Egypt controls the Suez Canal and the Saudi kingdom borders the Red Sea. Ethiopia, although landlocked, is a regional power that can convince Sudan and Somalia to revive piracy in the Gulf of Aden as well as the Arabian Sea.
In addition, the new BRICS+ members are major oil exporters. Brazil, China and Russia are major producers of metals and rare earths on which the energy transition depends.
The admission of Saudi Arabia also broadens the financial firepower of the BRICS+. Nearly 20% of international transactions are now done in yuan, which Riyadh intends to accept as payment for its oil.
Especially since the Chinese international payment system CIPS will soon connect as many banks as the SWIFT network and the yuan can be exchanged into gold for oil-exporting countries.
Let us not lose sight of the fact that American foreign policy has only one goal: to preserve the hegemony of the dollar. This exorbitant privilege demands that the entire world continue to trade in dollars and invest its trade surpluses in US debt.
What China is reluctant to do. Its holdings of U.S. Treasuries have fallen 35% over the past six years, from $1,200 billion to $770 billion.
Beijing does not want to find itself in the same situation as Russia, which saw half of its foreign exchange reserves go to the West.
Consequence for the dollar and bitcoin
The Nobel Prize-winning economist and professor at Yale University Robert Shiller spoke about the repercussions of handing over 300 billion dollars/euros of frozen Russian assets to kyiv:
“I can’t convince myself that this is the right solution. This would confirm in the eyes of Russian leaders that what is happening in Ukraine is a proxy war. Paradoxically, this could backfire on America and the West as a whole.
What signal are we sending to the dozens of countries which, like Russia, including the G7 countries, hold their reserves in dollars? If America does this to Russia today, it could do it to anyone tomorrow. This would break the reputation of the dollar and would be the first step towards the dedollarization that many are calling for. »
This is what we observe since according to the Wall Street Journalmore than 20% of oil exported in 2023 was sold in a currency other than the dollar.
To get to the heart of the subject that interests us, geopolitical tensions could influence the FED.
For the moment, the markets are counting on six or seven rate increases in 2024. Which, with ETFs, the FASB and halving would constitute the fourth major catalyst for the rise of bitcoin.
However, if the disruption in global maritime traffic worsens to the point of reviving inflation, the Fed and the ECB could postpone the rate cut.
That being said, debts have become such that rates can no longer remain high for long without triggering an exponential headlong rush. Given the explosion in US public debt servicing, the rate cut would only be postponed.
Regardless, the global revolt against the greenback bodes well for bitcoin as the cornerstone of the next international monetary system.
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