Hormuz Heightens Risk & My Crude Oil Price Target
Iran Risk Is Starting To Get Priced In
Day 4 of Operation Epic Folly
Wars Are Not Deflationary
How High Can Oil Go
Tech To Lose Its Key Source Of Funds
Iran Risk Is Starting To Get Priced In
My Right Tail Rotation call I made last Tues in software bounces is STILL working despite market volatility.
And my call Fri for higher Oil, Gold, VIX & USD all worked Monday.
So did the great put covering bounce & fade the bounce call live yesterday! ;-)
Today, market gapped down as dollar, oil and VIX spiked - but gold/silver/commodities rolled over WITH memory/hardware/foreign country sectors.
I had warned: “dollar and delivery” issues were affecting gold & silver.
And how emerging markets were most affected by the oil spike.
EWY, EWT, EWJ - Kospi -6%, bigger drop than Liberation day, worst day since August 2024 carry trade unwind (via Zerohedge).
SNDK, MU, WDC, STX - all gapped lower as a result. It was overdue & expected.
I posted yesterday my call for higher dollar into 99.38 as headwind for equities.
It tagged just above before retreating intraday, which timed perfectly with “support level 3” on hourly charts and VIX retracement inside 26. ;-).
All coordinated to give indices a boost of short covering.
But I still see QQQ 583 and SPX 6730 next week/two.
And I don’t see Trump being able to follow through with his promises of victory let along ability to ensure (not just insure) safe passage of ships through the Strait of Hormuz.
Day 4 of Operation Epic Folly
Feb 28: Iran war is already won
March 1: Tehran will be taken in 3-4 days
March 2: 4-5 weeks to go
Today: “Wars can be fought forever” - DJT
And what was promoted as a weekend bombing operation, was labeled a war by Hegseth yesterday and Rubio today. With Trump doubling down that “whatever it takes” may be needed.
Including and not limited to boots on the ground.
Given that Trump didn’t even call for evacuation of Americans - across 14 countries - until 3 days into his war with Iran, it would seem there isn’t a plan - or at least one that is working.
Which is why I warned last week that this US-Israel War against Iran will turn into a prolonged conflict as retaliation by Iran draws in allies and angry neighbors alike. As such, we are right to focus on the the heightened risks from Hormuz closure.
MarketWatch highlights some of these risks today from the respected energy expert Anas Alhajji, who worries:
investors are missing a major crisis unfolding after Iran’s bigger-than-expected reaction to U.S. and Israel attacks.
Iran on Monday targeted Saudi Aramco’s Ras Tanura oil refinery and Qatar’s liquified natural gas production in separate strikes. He said the market had not priced in Iranian attacks on neighboring energy production.
Alhajji said the world has enough oil for the short run because Iran, Saudi Arabia, the United Arab Emirates and Iraq moved large quantities out of the Gulf ahead of U.S. and Israeli attacks. But that covers probably about two or three weeks, while China has about two months of supply from building up after last year’s U.S. arrest of Venezuela President Nicolás Maduro, he said.
A war ending tomorrow would not stop bottlenecks that will take several days to clear from ships avoiding the Strait of Hormuz. Oil-producing countries that cut production will take time to get back online, he said.
“We never had those problems before. The Hormuz Strait never been closed before,” he said.
But it’s not just oil, as methanol and food are at risk. Alhajji noted 33% of the world’s globally traded fertilizers come from the Gulf, with planting season under way in Asia and Europe. Even if the war ends within weeks, people will be paying “the price of this for months to come if the fertilizer issue becomes a food crisis later on,” he said.
“The problem with the Trump administration is that they are not looking at the unintended consequences of their actions and their policies,” he said.
Wars Are Not Deflationary
The point of highlighting the above heightened risks from Hormuz is to highlight that any sustained disruption to the Strait of Hormuz will feed through to global inflation - as warned before the attacks on Iran.
Preparing for higher oil as a trade was the easy part. Preparing for higher inflation is how Hormuz really hits. Growth scare turns recession risk, and all that.
As a result, bond markets sold off as Fed rate cuts got pushed out - with expectations at 50%+ odds of no chance for a rate cut until earliest July per CME FedWatch but more likely September. My bet, they won’t be doing one then either.
ISM Manufacturing Prices Index already shows inflation is hot fire flames mode – 10 bps over expectations!
US ISM Mfg. Prices Paid Actual 70.5 (Forecast 60, Previous 59.0)
Add to that the US deficit is rising even more rapidly from War spending.
As inflation stateside rises and geopolitics escalates, capital can rotate out fast.
MONEY GOES HOME faster edition is another risk to equities.
