The crisis around the Strait of Hormuz is no longer just a story about oil prices.
Restricted tanker traffic is hitting the export revenues of some Gulf states at a time when many of them are financing massive infrastructure projects, state investments, and rising debt.
That creates an interesting chain of risks.
Lower energy exports → lower dollar revenues → greater financing needs → more pressure on government budgets and bond markets.
At the same time, shipping and insurance costs around Hormuz are rising.
This is where London enters the picture.
The City of London is one of the world’s major centers for banking, insurance, commodity finance, and international debt markets. If problems in the Gulf were to develop into broader credit losses, part of that stress could spread into the European financial system.
It is a risk worth watching.
The timing is also interesting.
The U.S. Treasury has announced that, starting in September, it will raise the maximum size of certain long-term Treasury buybacks from $2 billion to at least $4 billion per operation to support market liquidity.
It shows that pressure at the long end of the bond market is attracting increasing attention.
Hormuz may therefore become more than just an oil story.
If the problems persist, the stress could gradually spread from energy markets into public finances, credit markets, and eventually the global banking system.
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