War Note: Tanker Attacks Accelerate - Hormuz/Bab Update, Latest Crude Data, Slop World

In the War Note we discuss the acceleration of tanker attacks, cover Bab & Hormuz flows, look at the latest crude data, talk about the slop world and declining AI interest, and more.

Don Johnson (@DonMiami3), Chief Economist

Good Tuesday evening MacroEdge Readers & Community,

In this edition of the War Note - we’re going to keep it very brief - and discuss the latest developments in the US-Iran War, with the primary focus being the escalation in tanker attacks in both the Bab-el-Mandeb and the Strait of Hormuz over the past week. In just the last 48 hours, there have been ~half a dozen attacks on tankers and cargo ships. What we’re seeing is the dynamics of the war shifting to an economic one - and the Administration in the US is between a rock and a hard place. With the Trump Administration backing off on Canadian tariffs and reducing them to zero overnight as Canada threatened energy-related actions, this is playing out in real time. I continue to harp on energy/commodity cyclical bulls being patient through the October timeframe as the setup takes time to develop. There remains a single, and very important, ‘TACO’ in the chamber - and that will be the next release/allocation announcement from the Strategic Petroleum Reserve. From that point, what we’ll see is a market acknowledge that they may help the front-end very briefly, but the back-end of the curve is continuing to reprice to higher levels. I believe that there is less than a 10% chance that Strait of Hormuz traffic will normalize this year - which means more expensive foodstuffs, goods, etc. On the energy price side - we have diesel trading right under the previous all-time high - with the diesel spread up to $102/bbl - and trading near $200/bbl. Jet fuel is moving higher, and there’s no reason the entire energy and commodity landscape can’t continue to reprice; just give it the next two months for the entire dynamic to continue adjusting.

Markets today moved flat to lower - the tech and AI names got hit hard - and several technical warning signals continue to flash red - including things like the ‘Titanic Syndrome’ - Hindenburg clusters, et al. The ‘TACO-team’ (instead of A-Team) will continue to throw out airbags to roll out Sam Altman’s and Dario’s bags onto everyone’s head sometime in the next 8-16 weeks, and this will of course have implications for market liquidity. We may even see a pivot to crypto and everything else if the 2022 inflation trade is reborn with vigor going into the turn of the year. I am still beyond surprised when I see academics stuck in their textbooks and theories try to drum up reasons for ‘deflation’, ‘disinflation’.... No, no, no. Do they go to the same stores and food places that you and I go to?

Tomorrow evening we launch the Oil and Gas Strategy Note series - covering positioning, portfolio strategy, operated & non-operated opportunities - and you don’t want to miss anything our Oil and Gas Research team is putting out. Subscribe below:

In other news, the Saudi government has pulled funding for the F1 team for the 2027 season as lower exports start to bite:

Let’s dive in.

Tanker Attacks Accelerate - Hormuz/Bab Update

Hormuz transits are between 0 and 5 per day right now on the inbound/outbound readings:

I suspect that there is some traffic not being counted (even in the counters that are supposedly tracking shadow readings), but there is between 3-5mmbd leaving Hormuz, and the total outage is likely around 7mmbd. Still off the cycle high, but the effect is compounding as reserves continue to plummet, especially in the US. Expect another draw tomorrow in the EIA data, and I expect the next SPR announcement to come around the end of September window if there’s anything left to sell.

Bab traffic is dipping as tankers come under attack, too. The Iranian-Houthi proxies know that they can do real damage if they make the route uninsurable…

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