Geopolitical Risk & Oil Supply - Approximately one-fifth (20%) of global oil consumption passes through the Strait of Hormuz, making it a critical choke point [2] - Historically, disruptions to maritime traffic in the Strait of Hormuz have occurred, including attacks on tankers during the Iran-Iraq war [3][4] - Escalating conflict could lead to disruptions in traffic, potentially causing insurance costs for tankers to spike [7] - Iran may disrupt energy supplies to internationalize the cost of the conflict, potentially targeting energy facilities [9] China's Role - About one-third of the oil passing through the Strait of Hormuz is now going to China, marking a shift in global oil flows [6] - China's reliance on Iranian oil, especially for teapot refineries, raises questions about Iran's response to the conflict [7] - China is incentivized to de-risk the situation, but its influence over Iran is uncertain [10] Potential for Regional Instability - Iranian-backed militias in Iraq pose a risk to Iraqi oil infrastructure, particularly near Basra, where Iraq produces approximately 44 million barrels a day (44%) [11][12] - Proxies like the Houthis, retaining ballistic missile capabilities, could initiate cross-border attacks [13]