As the Iran war continues, it still appears that the best prospect for the Trump Administration to get past their severe denial and make genuine efforts to back out of the epic disaster they have created is a market rout. As we have demonstrated and others are staring to voice, the closure of the Strait of Hormuz, if it persists for even as much as a week longer, will inflict durable damage on the global economy, reaching far beyond the impact the world can see now, of higher oil and LNG prices whose effects alone will ripple though the costs of goods generally. The downside of a closure of a mere additional month, even assuming no damage to energy production facilities in the Gulf, given the time it will take to get shuttered operations back to full steam, is a serious global recession. Two months from today would translate into a multi-fronted real economy crisis and high odds of a global depression, along with food shortages.
So I remain stunned at the level of investor complacency and the willingness of too many to take handwaves from the Administration, bluster about how much we are hurting Iran and how the war is nearly won, and insubstantial promises of somehow forcing the opening of the Strait of Hormuz as a testimony to elite greed and incompetence. The head of every major financial firm and US multinational should be in Trump’s and Congresscritters’ faces demanding a monster change of course.
But between deeply internalized faith in Western superiority and the successful numbing effect of decades of ever-better propaganda, they cannot see what is obvious: Iran has the means and will to destroy the world economy. I had invoked the novel Dune early in this war, “He who can destroy a thing, controls a thing.” And as we have shown, by throttling the Strait of Hormuz, it has not merely strangled energy and fertilizer supplies, as serious as those are. We’ve pointed to the knock-on effect on other critical supplies, using sulphuric acid, which is essential in many manufacturing processes, as another example. And as we’ll soon show, the bottleneck in the Strait of Hormuz is also wreaking havoc with shipping generaly.
Let me offer a forecast. I am not saying this is what will happen, but right now, it seems a probable path. Trump and his team are increasingly messaging that somehow they will pry the Strait of Hormuz open. When that idea was first voiced, we showcased Daniel Davis in one of his Deep Dive presentations on what an impossibly bad idea that was, that it would simply open up naval ships for easy destruction by Iran. Nevertheless, talking this barmy scheme up to credulous investors and the public, that somehow the spice will be flowing again soon, is now the Administration’s best path for somewhat containing energy price rises and the immediate damage they do
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