BofA: Hormuz Needs 10 Times More Ships to Stabilize Oil Markets

Bank of America is forecasting oil prices could soar into winter unless the U.S. and Iran strike a deal to reopen the Strait of Hormuz, sparking severe shortages across diesel, gasoline, and natural gas markets. Francisco Blanch, BoFA's head of commodities and derivatives research, told CNBC on Monday that Brent crude prices have already surged to $86.12 per barrel, up 3.08%, while WTI crude stands near $80.72, up 3.25%.

Boss Blanch warned that only 5 to 10 ships are currently passing through Hormuz daily, compared to around 140 pre-war levels. To stabilize energy markets, tanker traffic would need to rebound to 80 to 100 ships per day. Diesel crack spreads have skyrocketed to $80-$85 per barrel, surpassing the price of WTI crude for the first time since rare occasions.

Refining margins are at record highs, and inventories provide little protection compared to past disruptions. Bank of America advises investors to become more defensive, with its bull-and-bear indicator soaring to 9.7, its highest since 2021. Strategist Michael Hartnett recommends reducing exposure to risk assets instead of adding to positions, and the bank remains in a "Retreat/Rotate not Reload" stance.

U.S. equities remain near record highs, leaving investors vulnerable if another surge in oil and fuel prices inflates inflation and the broader economy.