Circle March 26th on your calendar (Oxford Club)
Key Points
Carnival shares fell over 2% in premarket trading as WTI crude oil prices approached $85 per barrel, their highest level since April 2024.
The surge is driven by Middle East conflict disrupting the critical Strait of Hormuz, a chokepoint for about 20 million barrels of oil daily.
The broader cruise sector, including Royal Caribbean and Norwegian Cruise Line, was also trading lower ahead of the market open.
Carnival is scheduled to report earnings on March 20, with analysts expecting year-over-year growth in both earnings per share and revenue.
So, you're planning a cruise vacation and checking your portfolio. You might notice something odd Friday morning: the stocks of the companies that run those giant floating resorts are taking on a bit of water. Carnival Corp (CCL) was down more than 2% in premarket trading, and it wasn't sailing alone. The entire sector was feeling the pressure.
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The culprit? It's not a rogue wave or a norovirus outbreak. It's the price of oil. West Texas Intermediate (WTI) crude futures were flirting with $85 a barrel, hitting their highest mark since last April. Brent crude, the global benchmark, was up around $88. For the week, that's a roughly 20% jump—the biggest weekly gain since early 2022. That kind of move gets everyone's attention, especially companies that burn a lot of fuel to move cities-worth of people across the ocean.
Why Oil Is Spiking: A Strait Story
This isn't your typical supply-and-demand squiggle. The rally is being fueled by the escalating conflict in the Middle East. Specifically, fighting has started to disrupt shipping through the Strait of Hormuz. You might not think about it often, but that narrow waterway is the superhighway for global oil. According to Robin Brooks, a Senior Fellow at the Brookings Institution, about 20 million barrels of oil pass through there every single day.
To put that in perspective, that dwarfs Russia's total exports of roughly 7 million barrels per day. Brooks pointed out that the spike in Brent crude on Monday alone exceeded 7%. For comparison, when Russia invaded Ukraine in February 2022, the initial price jump was just about 2%. So, the market is telling us this disruption is a very big deal.
And the cruise lines are listening. It's a simple, expensive equation: higher fuel costs squeeze profits. So, Carnival's peers were sliding in tandem. Royal Caribbean Cruises Ltd (RCL) was down 2.32% premarket, and Norwegian Cruise Line Holdings Ltd (NCLH) fell 1.53%.
The Conflict Enters a 'Next Phase'
The broader context is a conflict that entered its seventh day on Friday. Israel's military chief, Eyal Zamir, stated that the joint U.S.-Israel campaign against Iran is entering a "next phase." The Israel Defense Forces reported destroying six Iranian ballistic missile launch platforms and three advanced Iranian air defense systems. The human cost is severe, with Iran's Red Crescent Society reporting at least 1,230 people killed in Iran since the fighting began.
In a move to try and ease some global supply pressure, U.S. Treasury Secretary Scott Bessent announced a temporary 30-day waiver. This will allow Indian refiners to purchase Russian oil, potentially diverting some demand away from other sources.
Earnings on the Horizon
Amidst this geopolitical and market turbulence, Carnival itself has a date with investors coming up. The company is scheduled to report earnings on March 20. The expectations, at least before today's oil-induced headache, were pretty positive:
EPS Estimate: 18 cents (Up from 13 cents year-over-year)
Revenue Estimate: $6.12 Billion (Up from $5.81 Billion year-over-year)
Valuation: P/E of 13.4x (which some analysts see as indicating a value opportunity)
So, the story here is a classic macro-meets-micro moment. A company's fundamentals might be pointing in one direction (up, towards a solid earnings report), but a sudden, external shock—in this case, a war-driven spike in its single biggest operational cost—can send its stock price in the other direction, at least for a day. Carnival shares were last seen down 2.50% at $26.48 in premarket trading.
Further Reading
Put $1,000 into this stock NOW [Not NVDA] (From Stansberry Research)
End of America Update (Porter & Co)