Good Sunday evening MacroEdge Readers & Community,
Today I had a fabulous cross-country travel day. Given some operational and organizational transitions underway across the board - I’ve decided to re-ramp up my travel schedule to continue to push our network to a broader audience among enterprise leaders with my ground-up approach - focusing specifically on oil and gas. This weekend was mostly uneventful until we got to the afternoon - when the US struck Larak Island - from which the IRGC has been launching anti-ship missiles at tankers in the Strait of Hormuz. Iran retaliated by launching their largest ballistic missile attack in what appears to be several months - though they did not target any energy infrastructure - instead targeting US military assets in the region. The ‘bear trap’ as I’ve called it - continues to play out - and finding a pathway out of this conflict by the end of the year is going to be an almost impossible task for the Trump Administration - especially with Brent in the sweet spot range for Iran - but below the point where other actors like China get more involved to calm things (>95bbl).
Iran is just playing the long game now as this has evolved into much more an economic war - and that’s pricing into the inflation risk across the commodity spectrum globally. Everything from food inputs to softs to energy prices are all re-rating higher, and I think that the risk is much higher to the upside without any Hormuz resolution by the end of October. I’ve long thought that October has served as that point of no return, and I also expect the Trump Administration to announce another SPR release at that time. This timeline is going to continue to ‘take patience’ as I’ve harped on, and the commodity trade will continue to get more constructive the longer the Strait remains impeded. Looking back from where we were in May when we spent two weeks on the ground in the Panhandle of Texas to where we are now is very interesting, and we’ve got something else ‘On the Ground’ in the works in the next few weeks, so stay tuned.
Given the escalation ramp-up, futures are down slightly - with small caps leading the dip, while tech also remains sideways and has for months now. Crypto is quite flat in the mid-high 70, and oil is up on the evening - in a triangle^2 pattern that will likely continue to play out until October before we start to see resolution.
The notable macro event for the week will be the ever-stupid nonfarm payrolls report that will get adjusted for the next 18 months, though do not take (even a negative print) as an excuse for the Fed being unable to hike this month. The reality is we’re sitting on the edge of a supply-shock driven inflationary impulse - and the Fed has no tool(s) to combat such an event… The Warsh/Bessent meeting is very interesting and likely signals something much deeper is going on underneath the hood. I noted today that the general apathy/incompetence around Hormuz is starting to get rather alarming, and the comparison to the early 2020 days (but in reverse for inflation and energy supplies) seems quite relevant.
