How Will Hormuz Hurt You?

The Real Estate Espresso Podcast

How Will Hormuz Hurt You?

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Welcome to the Real Estate Espresso, your morning shot of what’s new in the world of real estate investing. I’m your host, Victor Menasce.

On today’s show, we’re talking about the global supply chain shortages that are coming out of the Strait of Hormuz. This is a much bigger story than just oil and gas.

But first, on Thursday night, May the seventh, we’re going to be hosting a special webinar on mind-blowing use cases for artificial intelligence. If you want to learn how to use AI more effectively in your real estate investing business, you definitely want to check this out. We’re going to go about 40 minutes on Thursday evening at 8 p.m. Eastern time. Click on the link in the show notes, and we’ll get you registered for the AI webinar.

On today’s show, we’re talking about the supply chain risk that’s emerging from the Persian Gulf. This is much more than just an oil headline. The sectors that I would watch most closely are fertilizer and agriculture. That’s probably the most underappreciated systemic risk. The Gulf is a major source of urea, ammonia, phosphate, and sulfur, and those flows tie directly into crop yields.

The IEA says that more than 30 percent of global urea trade and 20 percent of ammonia and phosphate trade and half of the global seaborne sulfur trade moves through the Strait of Hormuz. The immediate impact is not just fertilizer price inflation, it’s food production risk. India, Brazil, South Korea, Thailand, Australia, parts of Africa are particularly exposed. Second-order effect is that farmers might cut application rates if fertilizer becomes unavailable or uneconomic. That shows up later as lower yields, not immediately as empty shelves.

Number two is helium. Helium is getting some news coverage, but not nearly enough relative to the strategic importance. Qatar is a pivotal supplier of helium because helium is extracted as a byproduct of natural gas processing. Reuters reported that Qatar produced nearly a third of the global helium supply in 2025, and the disruptions to Qatar’s gas supply have already doubled the spot helium prices.

That matters for medical MRI systems, semiconductor fabs, rocket and aerospace applications, fiber optics and specialty welding, as well as cryogenic research and quantum computing. The reason this is so fragile is that helium is not easy to substitute. It’s not easy to store, and it’s not easily ramped up elsewhere. In a shortage, MRI and aerospace probably get priority while lower-value uses get cut first. Chip makers might have some inventory, but a prolonged disruption would become a production planning problem.

Next on the list is aluminum. The Gulf is not just exporting oil; it’s exporting energy-intensive metals and refining. About eight percent of the global aluminum supply, roughly five million tons, is shipped each year through the Strait of Hormuz from Bahrain, from Qatar, from Saudi Arabia, and the United Arab Emirates.

But the part that’s getting less attention is the input side. The smelters need the raw material: the bauxite, the alumina, and the carbon anode materials. The aluminum smelters in the Gulf are highly dependent on imported alumina, and that region has six smelters but only two aluminum refineries. So it’s not just about getting finished product out of the Strait of Hormuz, it’s also getting some of the raw materials into the Persian Gulf.

The impacted areas include windows, doors, framing, automotive parts, aircraft and defense manufacturing, electrical transmission cable, racks and frames for solar panels, packaging, aluminum foil. There are many different things that are dependent on material coming out of the Persian Gulf. The risk here is not just price. Smelters are continuous process operations. If they shut down, or if they shut down improperly, restarts can be very slow and expensive.

Next we have sulfur and sulfuric acid. Sulfur is one of the least appreciated commodities in the entire world. It’s a by-product of oil and gas refining, and the Gulf is a major seaborne sulfur supplier. About half of the sulfur trade globally moves through the Strait of Hormuz. Sulfur is used to produce sulfuric acid. It’s a workhorse chemical. It’s used in producing fertilizer, in various chemical processes, one of the most important of which is copper refining.

If you don’t have enough sulfur—yes, there’s no copper mines in the Middle East—but you need the sulfur to produce sulfuric acid to refine the copper. That could have an impact on copper production on a worldwide basis. So a Gulf sulfur disruption can ripple into EV batteries, into grid infrastructure, into electric wiring, into mining, into food production, all at the same time.

Next, of course, is liquified natural gas and the entire gas-dependent industry. There were about 110 billion cubic meters of liquified natural gas passing through the Strait of Hormuz last year. Ninety-three percent of Qatar’s LNG exports and 96 percent of UAE’s exports are LNG, representing one-fifth of the global LNG trade. And there’s no alternative routes at that scale. There’s no pipelines, there’s nothing that’s going to get that gas out of those countries.

This is an impact both of supply as well as price. For example, gas is used as feedstock for ammonia, for methanol, for hydrogen, for petrochemicals, and some power-intensive manufacturing. If the LNG tightens, fertilizer plants outside the Gulf could become uneconomic.

Then there’s methanol. Methanol does not get the same attention as oil or LNG, but it sits inside a lot of industrial supply chains. Methanol is used to produce all kinds of things like formaldehyde resins used in wood products, to produce acetic acid, plastics, coatings, adhesives, blending in fuel, marine fuel, and chemical derivatives. There are so many chemical processes that depend on it.

The Gulf is a major producer of all of these petrochemical building blocks: ethylene, propylene, polyethylene, polypropylene, methanol, and all the related intermediaries. You’re probably thinking you’re going through a class in organic chemistry at the moment, and that’s pretty much what it is. Once you have methane, you can produce ethane and then ethanol, and all of these other organic chemical compounds.

It’s less visible because buyers often see the impact as rising prices in resin, in packaging shortages, delayed components, or higher freight costs, rather than strictly an exposure to the Persian Gulf.

What’s catching the headlines these days is oil and gas. But quite frankly, the hidden list is helium, sulfuric acid, aluminum, methanol, fertilizer, and then, of course, everything related to physical trade, including shipping. And for those of us in the real estate industry, the counterparty risks are not that well understood. This is something you do want to pay attention to because it’s going to present itself in shortages as well as price increases.

As you think about that, have an awesome rest of your day. Go make some great things happen. We’ll talk again tomorrow.

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