Banananomics: The World Takes Sides

As Iran warns Israel and the U.S. on a counter-strike, BRICS members (Brazil, Russia, India, China, South Africa, Egypt, Ethiopia, Iran, and the U.A.E) are siding with Iran while the G7 (Canada, France, Germany, Italy, Japan, the U.K. the U.S., and unofficially the E.U.) is behind Israel.

Inputs that matter: "We can't just pick and say, Iran is bad, but Russia is OK, and China is bad… They're all in this together," Rep. Michael McCaul (R-Texas), chair of the House Foreign Affairs Committee, said Sunday on CBS's "Face the Nation."

• The G7 explains that Iran, "with its actions, has further stepped toward the destabilization of the region and risks provoking an uncontrollable regional escalation."

• British foreign minister David Cameron said he had "formally condemned [Iran's actions] in the strongest terms."

• On Monday, the U.S. House of Representatives is set to vote on several bills toughening sanctions on Iran, including one aimed at reducing Chinese imports of Iranian crude oil.

• Currently, 80% of Iranian oil goes to China.

The opportunity: President Joe Biden convened the Group of Seven (G7) to coordinate a rebuke of Iran for its aerial attack on Israel and to prevent a more comprehensive regional escalation.

• After their video conference, the leaders issued a joint statement "unequivocally condemning in the strongest terms" the direct attack by Iran while expressing "our full solidarity and support to Israel" and reaffirming "our commitment towards its security."

• The Jerusalem Post reports, "Saudi Arabia acknowledged that it had helped the newly forged regional military coalition — Israel, the United States, Jordan, the United Kingdom, and France — repel an Iranian attack against the Jewish state early Sunday morning."

• "99% of the Iranian drones and missiles were destroyed before hitting their targets."

Zoom in: White House official John Kirby Sunday told ABC's "This Week" program on Sunday that the United States will continue to help Israel defend itself but does not want war with Iran.

• Asked if the US would support retaliation from Israel in Iran, Kirby clarified that their "commitment is ironclad" to defending Israel and to "helping Israel defend itself." 

• "And as the president has often said, we don't seek a wider regional war. We don't seek a war with Iran. And I think I will leave it at that," Kirby added.

Between the lines: Russia belonged to what is now the G7 from 1998 through 2014 when members were known as the Group of Eight (G8), but it was suspended following its annexation of Ukraine's Crimea region.

• BRICS began with a meeting of the leaders of China, India, and Russia on the margins of the 2008 G8 meeting in St. Petersburg.

• In 2009, the group held its first official meeting, and in 2010, it included South Africa.

• During 2024, BRICS expanded to include Egypt, Ethiopia, Iran, and the U.A.E.

Follow the money: Politico reports, "House Republicans were planning a coordinated legislative offensive on the Department of Energy's efficiency standards in a slate of bills to be voted on this week. But Iran's attack on Israel this weekend in retaliation for Israel bombing an Iranian consulate in Syria prompted House leaders to change course."

• "If it is not stopped, the administration's plans will impose burdensome and costly efficiency mandates for virtually every appliance in your home," said House Energy and Commerce Chair Cathy McMorris Rodgers (R-Wash.) at a recent hearing.

• "This is real. This is actually what Republicans are preparing to spend [time on] next week on in the House," said Rep. Don Beyer (D-Va.) on X, formerly known as Twitter, last Thursday.

• Oil prices fell more than 1% on Monday after rising ahead of Iran's airstrike. West Texas Intermediate crude futures were trading around $85 a barrel, while Brent futures slipped toward the $89 mark.

U.S. stocks have come under pressure recently as earnings season got off to a lackluster start, and concerns persisted that inflation cooling to the Federal Reserve's 2% target has stalled.

Inputs that matter: Oil prices fell more than 1% on Monday after rising ahead of Iran's airstrike. West Texas Intermediate crude futures were trading around $85 a barrel, while Brent futures slipped toward the $89 mark.

• The S&P 500 rose slightly, while the Dow Jones Industrial Average (DJIA) gained 0.3% after ending the week with sharp losses.

• Data released Monday (April 15) by the U.S. Department of Commerce showed retail sales rising 0.7% monthly and 4% since last year. 

• The most significant growth area during the month came from online sales, up 2.7% since February and 11.3% since March 2023. 

The opportunity: Sales declined in several categories during the month: sporting goods, hobbies, musical instruments, and books fell by 1.8%, clothing stores were down 1.6%, and electronics and appliances dropped by 1.2%.

• The monthly Consumer Price Index (CPI), which accelerated by 0.4% in March and 3.5% for the year, is growing faster than expected.

• While consumer debt is at an all-time high, the Federal Reserve Bank of New York warns that defaults are almost inevitable.

Zoom in: "We continue to see strength in the U.S. economy," Wells Fargo CEO Charlie Scharf said during that bank's earnings call.

• "Spending patterns and consumers using our debit and credit cards remain generally consistent and continue to grow year over year."

• According to the Federal Reserve Bank of New York, mortgage balances shown on consumer credit reports increased by $112 billion during the fourth quarter of 2023. They stood at $12.25 trillion at the end of December. 

• Balances on home equity lines of credit (HELOC) increased by $11 billion, the seventh consecutive quarterly increase after 2022Q1.

• At $1.13 trillion outstanding, credit card balances increased by $50 billion (4.6%). 

• Auto loan balances increased by $12 billion, continuing the upward trajectory since 2020Q2, and now stand at $1.61 trillion.

Between the lines: Tesla is the latest company to report a 10% layoff at a time of sluggish sales and slow stock performance.

• "As we prepare the company for our next phase of growth, it is extremely important to examine every aspect of the company for cost reductions and increased productivity," Musk said in the memo obtained by CNBC.

• Supply chain disruptions were partially to blame for the downsize.

Follow the money: According to the on-chain data provider, 370,000 new wallets holding at least one Bitcoin (BTC) have been created in the last six days, and the number of BTC holders now totals 52.94 million, growing by 0.1% since the beginning of the year.

• BTC gained on Monday, adding 3% after dropping to as low as $61,300 over the weekend.

• Germany's largest state-backed lender, Landesbank Baden-Württemberg (LBBW), is set to partner with Austrian exchange platform Bitpanda to offer crypto custody services.

"Texas-based Exxon Mobil now expects its six offshore Guyana projects to generate gross production of 1.3 MMbbl/d by 2027," reports Yahoo! Finance.

Inputs that matter: Whiptail is Exxon's "sixth multi-billion-dollar project in Guyana," Mallon said in an April 12 press release, and production is expected to begin in 2027.

• Block partner Hess, which Chevron aims to acquire in a $53 billion all-stock deal, said Whiptail will target an estimated resource base of more than 850 MMbbl of oil and include up to 10 drill centers and 48 production and injection wells.

The opportunity: According to The Motley Fool, "Oil is a notoriously volatile commodity (just over the last five years, we've seen prices swing from negative numbers during the pandemic, to as high as $120 a barrel in the immediate aftermath of Russia's invasion of Ukraine)."

• On Monday, the U.S. House of Representatives is set to vote on several bills toughening sanctions on Iran, including one aimed at reducing Chinese imports of Iranian crude oil.

• Currently, 80% of Iranian oil goes to China.

• G7 sanctions are already in place against Russian oil with price caps.

• OilPrice.com reports, "The cap requires that any Western company transporting Russian oil receives a so-called attestation, a document vouching that the cargo cost $60 a barrel or less."

Zoom in: According to The U.S. Energy Information Administration (E.I.A.), the Strait of Hormuz is the world's most important oil transit chokepoint.

• Iran seized an Israel-linked commercial ship early on Saturday morning as it passed through the Strait of Hormuz, reports the B.B.C.

• Saudi Arabia and the United Arab Emirates (U.A.E.) have functioning pipelines that can circumvent the Strait of Hormuz.

• 82% of the crude oil that moves through the Strait of Hormuz goes to Asian markets: China, India, Japan, and South Korea.

Between the lines: Sanctions on oil by the G7 (Canada, France, Germany, Italy, Japan, the U.K., the U.S., and unofficially the E.U.) is a soft attack against their BRICS rivals (Brazil, Russia, India, China, South Africa, Egypt, Ethiopia, Iran, and the U.A.E.).

• Analysts at S&P Global Commodity Insights have predicted that global crude demand will increase by 1.4 mb/d in the current year.

Follow the money: As tensions rise between G7 and BRICS countries, western companies focus on oil exploration outside the group.

• A significant breakthrough occurred in Namibia's energy sector in early 2022 with Shell Plc. (NYSE: SHEL) and TotalEnergies (NYSE: T.T.E.) finding oil in the Graff and Venus blocks. This oilfield has the potential to become the largest-ever discovery in Sub-Saharan Africa.

• The Energy Select Sector SPDR Fund (X.L.E.) is an ETF representing Western energy stocks from the S&P 500 index. It is currently peaking near its all-time high of $100.39, which occurred in 2014.

• Oil prices fell more than 1% on Monday after rising ahead of Iran's airstrike. West Texas Intermediate crude futures were trading around $85 a barrel, while Brent futures slipped toward the $89 mark.