Currency Corner by Kotak Securities

Potential Impact on Iran’s Oil and Gas Production During a Conflict with Israel



In the event of an all-out war between Iran and Israel, Iran’s oil and gas production and exports could face significant disruptions, with wide-reaching implications for the global energy market.


Oil Disruptions:


Key Infrastructure Vulnerability: Iran's major oil export terminals, such as Kharg Island and Sirri Island, are critical to its export operations. These could be prime targets in a conflict, potentially halting up to 1.6-1.7 million barrels per day (bpd) of crude oil exports. Damage to these facilities could dramatically reduce the country's ability to supply oil.


Refining and Storage: Attacks on refineries in Bandar Abbas or Abadan could cripple Iran’s refined product exports, which contribute 240,000-300,000 bpd to its total oil-related exports.


Strait of Hormuz: This vital shipping lane, through which 20% of the world’s oil passes, could become a focal point of the conflict. Any disruptions here would not only impact Iran but also global energy supplies.


Gas Disruptions:


Pipeline Vulnerabilities: Iran's major gas export pipelines, such as the Tabriz-Ankara pipeline to Turkey, could be targeted. This pipeline carries 9-10 bcm/year of natural gas, a significant share of Iran’s total exports.


Domestic Gas Supply: The South Pars gas field, which powers much of Iran’s domestic energy needs, could also be disrupted, impacting 1 bcm/day of natural gas production, leading to power outages and industrial slowdowns.


Total Potential Disruption:


Oil Exports: Up to 100% of Iran's crude oil exports (1.6-1.7 million bpd) could be jeopardized.


Gas Exports: Around 17-20 bcm/year of natural gas exports, especially to Turkey and Iraq, could be halted.


Domestic Supply: Iran’s internal energy consumption could also suffer due to damage to key gas fields and refineries, causing widespread energy shortages.


This potential disruption would have significant consequences not only for Iran but for the global energy market, especially if conflict escalates to affect the Strait of Hormuz.


(anindya.banerjee@kotak.com)

China’s grand plan to revive its economy hinges on a fundamental miscalculation: the idea that sparking a bull market will magically boost domestic consumption.


Here's the problem: Chinese households are already under immense financial strain, squeezed out of the nation’s $20 trillion GDP pie like they’re not even invited to the table. And let’s not forget, domestic consumption as a share of GDP is directly tied to households' share of national income—which, by the way, is abysmally low for a country of this size. It’s hard to fuel an economy on spending when households are barely scraping by.

After years of disastrous investments in failed private lending schemes, bank collapses, and a property bubble that burst with all the subtlety of a detonated minefield, it's no surprise households are reluctant to open their wallets.


The government's corporate crackdowns only further eroded confidence, leaving households squeezed even more.

So, what's Beijing’s brilliant idea? Instead of fixing the root problem—actually transferring wealth from corporations and the government to the people—Chinese policymakers think they can kick-start consumption by inflating stock prices and hoping for a "wealth effect." Because apparently, who needs real money when you can just make people feel rich, right?


This stimulus package is woefully vague on any real wealth redistribution mechanisms. Instead, it’s all about optics—put the cart before the horse, inflate stock prices, and see if households magically start spending.


After all, nothing screams "financial stability" like an artificial bull market. What could go wrong?

Of course, the influx of foreign money is fueling this delusion for now. But when the cash tap inevitably dries up, both local and foreign investors will find themselves in a high-stakes game of musical chairs, where most are guaranteed to lose.

And, as usual, households, the very group that should have been at the center of economic policy, will be left holding the bag.

If this is China’s grand economic strategy, they might as well start printing "Pipe Dreams of Prosperity" on their next set of stimulus checks.


~~ anindya.banerjee@kotak.com

Fed lowers rate by 50 bps and commits to lower by 25 each over Nov and Dec.

Gold and silver rallies. Dollars takes dip

Oil Crash: A Boon for India

( Anindya Banerjee)


The global oil market is experiencing a seismic shift, with Brent crude prices plunging to 22-month lows. This dramatic decline is a double-edged sword for nations around the world, but for net oil consumers like India, it's a much-needed windfall.


Lower oil prices directly translate into reduced inflation, effectively acting as a tax cut for Indian households. With more money in their pockets, consumers are likely to increase their spending, boosting demand for goods and services across various sectors.


This increased consumer activity will benefit businesses, particularly those that are not directly involved in the oil industry, as they will experience higher sales and improved operating margins.



The Indian government also stands to gain from this oil price slump. By strategically managing the pass-through of lower prices to consumers, the government can potentially increase its fiscal space, allowing for increased public spending or debt reduction.


The extent to which these funds are utilized will determine the immediate economic impact on households and businesses.
While the declining oil prices are generally positive for the Indian economy, their impact on the rupee is less predictable.


The lack of speculative activity and arbitrage in the Indian currency market has limited its responsiveness to global economic developments.


As a result, predicting the exact movement of the rupee based solely on oil prices is a challenging task.