China Rising, Hormuz Squeezed
krinza@kay
The idea
I don't think the US and Israel can finish a war with Iran, so Hormuz stays tight and China comes out looking stronger. I'm playing that through energy producers outside the Gulf, tanker owners who benefit from longer riskier routes, and a broad China fund rather than single names, plus defense makers for countries nervous about China's reach. I hold 10% cash since headlines here can swing prices fast, and I'd rethink this if the standoff actually cools or tanker rates stop responding to it.
What will be bought
- Oil and gas producers far from the Strait of Hormuz earn more when the strait tightens and buyers turn to farther, safer sources. · Exxon MobilIt pumps oil far from the Gulf, so it earns more when Hormuz stays squeezed and buyers shift to distant, safer sources., Cheniere EnergyIt ships liquefied gas from the US, replacing Qatari gas that has to pass through Hormuz when the strait is risky., ChevronIt pumps oil in the US and other places far from the Gulf, earning more when Hormuz stays squeezed., ConocoPhillipsIt only finds and pumps oil and gas with no refining to cushion it, so its profits rise most directly when crude prices stay high from Gulf supply constraints., Canadian Natural ResourcesIt pumps oil in Canada, so it gains when the world can't count on Gulf barrels and pays a premium for distant, safer supply., EquinorIt supplies oil and gas from the North Sea to Europe, which becomes the fallback when Gulf shipments are risky., Suncor EnergyIts oil comes from Canada's oil sands, nowhere near Hormuz, and grows more valuable when Gulf supply is choked off.33%
- Countries that see China as a threat buy more weapons from US makers, and spending on long-range deterrence like fighter jets, missiles and naval vessels keeps rising. · Northrop GrummanIt builds stealth bombers and military satellites that the US and its allies want to counter China's reach., Lockheed MartinIt makes F-35 fighter jets that countries near China buy in larger numbers as they raise defense budgets against Chinese power., RTXIt makes Patriot missile defense systems that countries buy first when they feel threatened, and China's neighbors keep ordering more air and missile defense., L3Harris TechnologiesIt makes the radios, sensors and satellite links that militaries need to coordinate with each other, which matters more as allies around China work together., General DynamicsIt builds US Navy submarines, including those tied to the Australia deal meant to counter China at sea., Huntington IngallsIt is the biggest US Navy shipbuilder, and a bigger fleet is the main answer to China's navy., Kratos DefenseIt makes cheap combat drones that militaries want in large numbers to face a big rival like China.30%
- This fund holds China's biggest companies, giving the take a single lever on China's global standing without doubling up on any single stock. · iShares MSCI China ETFIt holds China's biggest companies in a single fund, capturing China's geopolitical gains without picking single stocks or facing secondary sanctions risk.14%
- Tanker owners charge more when shipping routes grow longer and riskier, and Hormuz tension forces oil and refined fuels onto longer paths. · FrontlineIt owns tankers that carry oil on longer, more dangerous routes when Hormuz is risky, and tanker owners charge more per trip., Scorpio TankersIt owns tankers that carry refined fuels like diesel and jet fuel, which also take longer routes when the Gulf is dangerous and shipping rates stay high., DHT HoldingsIt owns very large crude tankers that earn the most when oil gets rerouted around trouble in the Gulf., International SeawaysIt runs both crude and fuel tankers, so it earns more from either kind of rerouting around Hormuz.13%
- Cash10%