Redeye Macro Note: A Look at a Closed Hormuz & the Bab, Saturday TACOs - Will it Continue?

In this brief Redeye Macro Note - we discuss developments related to the Strait of Hormuz and Bab-el-Mandeb and highlight some of the Saturday 'TACOs' announced today as the US pauses airstrikes.

Don Johnson (@DonMiami3), Chief Economist

Good Saturday evening MacroEdge Readers & Community,

I am starting this article before the evening turns to Sunday morning, so I will keep that greeting in place - even though I know that many of you will be catching this on Sunday morning. It’s going to be an early morning for me tomorrow, and we have a very busy week ahead - but stay tuned for another potent Weekly Macro Note tomorrow evening. This evening I noted that I would also be discussing oil and gas opportunities on the non-op side, but I will move that to the Tuesday evening War Note so that this stays short and focused on the latest updates on the Strait of Hormuz and Bab, as well as the several ‘TACO’ headlines that were announced earlier in the day.

The re-emergence of the ‘TACO’ is not surprising if you read the Midweek Macro Note, as oil prices have returned to prices that will essentially sink the party currently in power (GOP) in the Midterms - and time is running out for it to actually make a difference in the mind of the consumer. Right now, the consumer economy for the 80-90% continues to be greatly harmed by high prices, the war, and the closure of the Strait of Hormuz (while Bab is now partially closed to some Saudi vessels) - though I expect that this latest pause will once again end up short-lived.

Weekend CFDs show oil down about 3.5% - though from a technical point of view, I like what I am seeing emerge if a higher base is now formed in the mid-80s (covered in the Saturday TACOs section).

This evening I am just going to provide a brief update on the traffic situation in the Strait of Hormuz and Bab - both of which are impeded - though Hormuz to a much higher degree. I expect that Ansarallah involvement in Yemen played a role in Trump suspending further action for the time being in Iran, with a major attack launched against an Aramco facility - and several other locations in the country in the last 48 hours. Another Saudi crude carrier was also impacted in the Red Sea, and the US continues to fight the war from (what I say as a non-war expert) a very odd position? Additionally, I will provide a brief update on the Saturday TACOs seen today - which sent weekend oil CFDs down slightly, though when zooming out in the technical context, this could be very positive to finally land in the 90-110 range on a much longer-term basis. Tomorrow evening, we’ll be exploring macro data from the last week, the FOMC week-ahead, and much more - so stay tuned.

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A Look at Hormuz and the Bab

News ‘broke’ this morning that Oman was leading a new delegation in Iran to resume talks on Hormuz traffic, while this is occurring, it was also noted that the President of the US halted attacks on Iran, and this halt has now lasted two days.

It appears that there are a variety of reasons contributing to the President getting spooked again on a broader attack - but one of those is the fact that Hormuz is once again fully closed - hitting zero crossings on Saturday (which marks just the second 0 reading for the month of July):

Insurers still won’t touch vessels entering and exiting the Strait - and the fact that this is still as closed as it is will be a huge problem the remainder of the year if there aren’t workarounds to a much greater degree than the ones in place today as the US runs through its SPR… and other countries do too.

(Continued below: A Look at Hormuz and Bab, Saturday TACOs - Will it Continue? More Inflation Warnings at the Pump)…