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Global food production at stake: The Financial Times reports twenty-five percent of the world’s traded oil passes through the Strait of Hormuz, which has garnered much attention in recent weeks.. However, it also carries the fertilizer components that underpin roughly half of the world’s food supply.
Gulf states account for 49 percent of the globally traded urea and 30 percent of ammonia, perishable contributors to the nitrogen cycle that makes high-yield agriculture possible. Halting that supply chain ultimately changes soil chemistry and planting decisions over the months that follow.
Before the first strike in Iran, the global food system was already running on reduced redundancy due to the lingering conflict between Russia and Ukraine – which makes up roughly a quarter of global wheat trade. Some 400 million people across the Middle East and east Africa have been absorbing that supply shock for three years. The Hormuz closure isn’t breaking a healthy system; it is breaking one that was already compromised.
Greenback will fade along with growth prospects: A rally in the U.S. dollar since the start of the war in Iran could slow if currency and rates markets shift focus from the inflationary consequences of the conflict to growth concerns, according to Goldman Sachs.
Bloomberg quoted Goldman’s Isabella Rosenberg, who stated, “while the market has largely priced the oil shock as an inflation and terms-of-trade event, a shift towards larger downside growth risks would likely temper broad dollar appreciation.”
Analysts noted the Japanese yen and Swiss franc, as safe havens, would gain the most against the dollar in a scenario where growth concerns result in equity-ed tightening.
While Goldman still sees the dollar gaining against G-10 currencies in such an environment, the greenback would likely fail to maintain the pace of its surge in March. The Bloomberg Dolar Spot Index, which measures the currency against a basket of peers, has rallied 1.7% since the conflict started on Feb. 28, rising in tandem with Treasury yields and energy prices.
Record Heatwave: Greg Gallina of the National Weather Service’s Weather Prediction Center stated, “Basically the entire U.S. is going to be hot,” and “the area of record temperatures is extremely large. That’s the thing that’s really bizarre.”
This heat dome, in which high pressure is acting like a pot lid trapping hot air over a region, will leave Flagstaff, Arizona, with 11 or 12 straight days of temperatures higher than the city’s previous March record, said meteorologist Jeff Masters of Yale Climate Connections.
Bloomberg reports Gallina stated the dome’s eastward movement will mean temperatures in the 90s Fahrenheit by Wednesday over the southern and central Plains. Frome one-quarter to one-third of the 48 continental states will be flirting with records for March, he reported.
The physical area of this heat wave likely dwarfs two other historic heat waves – one in 2012 in the Upper Midwest and Northeast and another in 2021 in the Pacific Northwest – according to weather historian Chris Burt, author of the book “Extreme Weather.” Burt said it may not be as large as the Dust Bowl heat waves of 1936, but that was a series of heat waves over two months during summer, not a single big event like now.
Both the Dust Bowl and 2021 heat wave were more intense with higher temperatures that affected people more because they fell in June and July, noted Gallina.