Redeye Macro Note: The War Drums Get Louder and the Implications are Bigger than Ever
In this Redeye Macro Note - we discuss the latest from the Israel-Iran conflict, including downed US aircraft. We highlight the latest evolving geopolitical risks, domestic cost increases, & much more
Don Johnson (@DonMiami3), Chief Economist
Good Friday evening and happy Easter weekend to our MacroEdge readers & community,
I hope you have had a fruitful week. I am back to Mountain Time for the next few days - speaking on regional airline dynamics amidst this energy shock that still hasn’t really made its way to North America. Elsewhere in the world, and in the global south, that will be a different story - but for the time being, the US still has another 3-8 weeks or so of some ‘normalcy’ before more folks start to see impacts of the Strait of Hormuz closure & global production outages to the tune of 10+mbpd. While domestic production mitigates some of those issues, if we progress toward a broader ground conflict and infrastructure is destroyed at an accelerated pace, we may be looking at many years before oil production can recover the pre-conflict levels. Every hour that ticks by now seems to be a step towards this broader conflict that I think is on our doorstep, and we’re taking seriously our information role in getting accurate and reliable data out to our community right now on a 24/7 basis.
We wound down the early week yesterday with a bizarre market day as energy markets globally - led by oil prices - surged higher, while equity markets staged a sharp bounce after a partial headline flooded the airwaves and ‘X’waves. The conflict seems to be evolving toward a ‘war’ - with huge resource movement now occurring via airlift from the United States towards Europe and the Middle East. The war also escalated today on the aviation front - with multiple US aircraft downed - and a pilot still missing. Multiple F-15s, an A-10, an F-16, and several helicopters were hit during operations today, highlighting a significant escalation in air defense on the side of the Iranians. Some of it was likely feeling out what air defense looked like in certain Iranian regions, and I do expect that if we do not see some sort of ceasefire by the end of next week, we will progress to a boots-on-the-ground style conflict, which as discussed below, is almost guaranteed to be lengthy. As highlighted by our fantastic guest, Rory Johnston (founder of CommodityContext.com) tonight, the risks for the entire global economy right now are completely understated. We’re in an extremely vulnerable place worldwide, and global south countries are at risk of civil unrest and even uprisings the longer the conflict continues. That’s before assessing what things like a closure of Red Sea navigation by the Houthis could do.
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In addition to all of the geopolitical volatility, that’s feeding into domestic cost increases now, with airlines like United announcing new baggage fees to offset the surging fuel costs. The fuel cost spikes alone are enough to completely wipe out profit margins for the airlines, and that’s going to start reflecting in the late Q2 earnings now.
As the offramp window to avoid broader conflict continues to narrow - especially on the back of Iran rejecting any peace talks in Pakistan (announced earlier today) - we’re going to be staying on top of our strategy, releases, and reports to keep our community informed in how we can best prepare and tackle a complex global situation that is changing by the minute. I noted to our team a few nights ago that there have been several instances now where an entire report has been assembled, and then we’ve had to go back and redo entire segments, or add as we go - especially while markets are open - because things continue to evolve so quickly. It’s not looking like we’re going to see an off-ramp - but the outcome of either decision is something that we need to be prepared for.
If you missed a fantastic MacroEdge Radio #73 with JustDario - an expert on the AI and data infrastructure space and so much more - please find it below:
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The Macro Club - The Latest
As highlighted in the update from a week ago, I am very pleased to begin rolling out The Macro Club come late June. This is going to act as our own community-based ‘Citadel’ for intelligence, discussions, strategy, and more - and through this community, we’re going to have the ability to foster relationships through both virtual and in-person interactions, and create something that is missing today in our virtual world. I am also very excited by this new offering from our Macro Research team, and it’s part of our continued 2026 vision to create things that will continue to put us at the forefront of our industry and space, which still operates in the dark ages by-and-large. We have the unique opportunity to build a more specialized community from our fantastic community that continues to grow by the day, and there’s going to be many important things that come on The Macro Club in the months to come.
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We will start working through conversations with prospective members in the coming weeks, and are aiming for a first community of 150-200 people as ‘founding members’.
Stay tuned for more here.
A Realistic Look at Iran
As highlighted in an X post I made earlier this evening, I’ve spent the last several weeks talking to some of the brightest war experts and historians who generously lent some time on getting their thoughts on what an actual broader conflict would be like. The overall assessment is that there really is no positive outcome in any situation. Nuclear or not, Iran has the capabilities and capacity to bring the global economy to a complete standstill - adding in its proxy capabilities - and still has a very capable military and hierarchy enabled by the IRGC. There have been many posts in recent days… going… ‘who is in charge?’ - but the general feedback that I received was that this is now by design, so that the fractured command structure as it is does not get completely wiped out.
Topographically speaking, experts to me noted that Iran is a natural fortress, and completely unique in the fact that a traditional ground invasion is almost impossible in just massing forces and going in. We’re first likely to see limited ‘test’ operations - and that was likely some of what we saw today in assessing what Iranian air defense was capable of during a broader ‘low flying’ scenario of moving in troops and other ground resources.
[Continued below: Strait of Hormuz Status and Global Energy Crisis - Domestic Cost Increases, Energy and Portfolio Strategy Updates, Quarter End Note from John)…
