Hugo Angelo Lucien Manenti @hugomanenti95: "I am posting a summary..."

Portugal

I am posting a summary of a longer Substack post – which you can find here: hugomanenti.substack.com/p/war-in-the-middle-east-the-strait Questions welcome! 🛢️ 𝗪𝗮𝗿 𝗶𝗻 𝘁𝗵𝗲 𝗠𝗶𝗱𝗱𝗹𝗲 𝗘𝗮𝘀𝘁 – 𝗘𝘂𝗿𝗼𝗽𝗲 𝗮𝗻𝗱 𝗔𝘀𝗶𝗮 𝗶𝗻 𝘁𝗵𝗲 𝗙𝗶𝗿𝗶𝗻𝗴 𝗟𝗶𝗻𝗲 War broke out late Friday. The U.S. and Israel struck Iran's leadership and key defence assets. Iran responded across the region – hitting civilian and energy infrastructure in the Gulf. Markets are repricing fast: WTI +6%, Henry Hub +3%, TTF pushing +50%. The spot move is real. But the bigger question is whether the forward curves are right to assume this is brief and self-healing. I don't think they are. 𝗜. 𝗪𝗵𝘆 𝗛𝗼𝗿𝗺𝘂𝘇 𝗠𝗮𝘁𝘁𝗲𝗿𝘀 — 𝗮𝗻𝗱 𝗪𝗵𝗼 𝗚𝗲𝘁𝘀 𝗛𝘂𝗿𝘁 The Strait of Hormuz clears ~20 million barrels/day – over a quarter of all global seaborne oil – and about a fifth of all LNG. There is no real bypass. Saudi/UAE pipeline capacity tops out at 2.6mbd. That is a rounding error. OPEC spare capacity doesn't help either – if the Strait is impaired, those extra barrels simply can't get out. The consequences are uneven: 🔹 U.S. – net energy exporter, structurally insulated. Will feel it in inflation at the margin, little more. 🔹 Asia – direct physical exposure. Over 80% of Hormuz flows go to China, India, Japan, South Korea. China sources half its total oil imports from the wider Middle East, and faces additional squeeze from U.S. sanctions on Venezuela. 🔹 Europe – faces a gas timing problem that could become a crisis. 𝗜𝗜. 𝗘𝘂𝗿𝗼𝗽𝗲'𝘀 𝗩𝘂𝗹𝗻𝗲𝗿𝗮𝗯𝗶𝗹𝗶𝘁𝘆 Europe heads into refill season – starting April – with storage near 30% full. The EU target is 80% by November. That gap was already nearly impossible to close under benign conditions. Now add LNG disruption and Asia competing hard for the same cargoes. Price becomes the only release valve. You can already see it in European industrial and chemical stocks today – higher gas prices compress margins, feed into power markets, and raise household bills. Disruption lasting more than a few weeks stops being a tail risk and becomes the base case. 𝗜𝗜𝗜. 𝗪𝗵𝘆 𝘁𝗵𝗲 𝗖𝘂𝗿𝘃𝗲𝘀 𝗔𝗿𝗲 𝗪𝗿𝗼𝗻𝗴 Both oil and gas term structures still read as "temporary." The back end of oil is in the low-mid $60s. TTF collapses after the near-term spike. The market is saying: ugly now, fine later. I think that comfort is misplaced. ✅ U.S. shale is less responsive than assumed. The DUC inventory cushion has been worked down. The sector is more industrialised and disciplined – it doesn't chase a one-week price signal with a surge in output. ✅ Europe's refill problem was already structural before this week. Disruption doesn't create the problem – it removes the narrow margin of error and turns a difficult situation into a crisis. When the market accepts persistence, repricing shows up in the belly of the curve first. We're not fully there yet – but evidence is leaning that way. 𝗜𝗩. 𝗣𝗼𝗿𝘁𝗳𝗼𝗹𝗶𝗼 𝗣𝗼𝘀𝗶𝘁𝗶𝗼𝗻𝗶𝗻𝗴 Since 2020, geopolitical dislocation has been a structural theme in how I build the portfolio. This week is exactly the scenario I've been building resilience against: ✅ ~25% in oil & gas – U.S. onshore and global offshore, away from the affected geography. Benefit from higher prices without the operational disruption. Also hold solar and uranium, which benefit as fossil fuel economics worsen. ✅ Defence exposure via $AMTM (Amentum Holdings Inc) and $IRDM (Iridium Communications Inc) – accelerating procurement cycles and satellite comms increasingly critical in contested areas. Also $CRWD (Crowdstrike Holdings) and $NET (Cloudflare) for cybersecurity. ✅ U.S. reindustrialisation via $WCC (WESCO International Inc) and $HRI (Herc Holdings) – onshoring urgency only accelerates in this environment. ✅ Deliberately low European and Asian exposure – a considered choice, and this week is a reminder of why. These positions don't make us immune to volatility. But they keep us on the right side of the dislocation. 𝗖𝗼𝗻𝗰𝗹𝘂𝘀𝗶𝗼𝗻 The U.S. absorbs this through inflation. Asia faces a direct supply shock. Europe faces a slow-motion refill crisis hitting its industrial base at the worst possible time. If disruption persists, the real trade is not spot – it's the mid-curve, where duration gets priced. I'm watching closely and will update as things develop. As always, I welcome your questions and feedback. All the best, Hugo

Not investment advice. The author may have financial interests in the mentioned instruments.