u/orange-heroin 5.0 3 ideas

Middle Eastern suppliers are declaring Force Majeure, forcing clients to pay spot prices ($120+) instead of $70 contract prices. The physical inability to deliver via normal routes is keeping spot prices highly elevated, and suppliers are successfully passing this premium to desperate buyers. Long crude oil as the supply shock and FM declarations force the market to absorb massive spot premiums. The Strait of Hormuz reopens quickly (within 2 weeks), collapsing the spot premium.

Regional food manufacturers and mid-chain distributors are locked into fixed-price contracts but must now pay spot prices for inputs. Because governments cap prices on consumer staples, these companies cannot pass the surging input costs to consumers and must eat the margin losses. Short consumer staples and mid-chain manufacturers who lack the working capital to bridge the gap between fixed revenues and surging spot input costs. The supply shock resolves before termination clocks expire (~45 days), or governments allow price hikes.

Airline management (like UAL/AAL) have previously cited Force Majeure risks as a reason to shy away from aggressive fuel hedging. In a true catastrophe scenario (like Hormuz closing), the counterparties to the hedges might declare FM, rendering the hedges worthless just when they are needed most. Avoid airlines relying on paper hedges to survive the $120+ oil spike, as counterparty risk is extremely high. Hedges hold up legally, or airlines successfully pass fuel surcharges to travelers.