Per Kristian Hong

Oil shipments from Iran’s main export terminal appear to have come to a standstill over the past several days, according to satellite images, the first sign of a prolonged halt since the start of the war bloomberg.com/news/articles/…

The Atlanta Fed's sticky-price consumer price index (CPI)—a weighted basket of items that change price relatively slowly—rose 4.6% (on an annualized basis) in April, following a 2.4% increase in March. On a year-over-year basis, the series is up 3.1%. On a core basis (excluding food and energy), the sticky-price index rose 4.8% (annualized) in April, and its 12-month percent change was 3.0%. The flexible cut of the CPI—a weighted basket of items that change price relatively frequently—increased 17.6% (annualized) in April and on a year-over-year basis, the series is up 5.6%. atlfed.org/4dg6Dc3

The world is losing oil, fertilizer, and sulfuric acid simultaneously. The market priced only the oil. Per The Wall Street Journal, citing Argus pricing data and the US Geological Survey, sulfuric acid prices in China rose roughly 1,150% in May compared with two years earlier. Middle Eastern sulfur prices surged 750%. Chile, the world’s largest sulfuric acid importer, saw prices jump 230%. Sulfuric acid converts phosphate rock into fertilizer. It processes copper. It manufactures batteries. It fabricates semiconductors. The Persian Gulf supplies roughly half of global sulfur exports. The chemical that touches food, electric vehicles, and chip fabs is breaking simultaneously. Saudi Aramco CEO Amin Nasser told investors Monday this is “the largest energy supply shock the world has ever experienced.” Per CNBC, the world has lost one billion barrels of oil supply, net 880 million after east-west pipeline reroutes and strategic reserve releases. Two to five ships now pass Hormuz daily, down from seventy before the war. Around 240 ships are waiting outside. The market loses 100 million barrels per week the Strait stays closed. If disruption persists past mid-June, normalization runs “into 2027.” The Wall Street Journal reports US crude inventories including the Strategic Petroleum Reserve have fallen for four consecutive weeks and risk reaching their lowest level since 1982. Per Bloomberg, the IEA coordinated the release of 400 million barrels of emergency reserves. The United States has released only 79.7 million of the 172 million it pledged. JPMorgan head of global commodities Natasha Kaneva warned OECD oil inventories could reach “operational stress levels” by June and “fall to minimum operating thresholds by September.” This is the energy story. Per the United Nations Food and Agriculture Organization, roughly one-third of global fertilizer trade transits the Strait of Hormuz. Qatar Fertiliser Company, which supplies 14% of global urea single-handedly, has declared force majeure. Major fertilizer plants across the Gulf have reduced or suspended production. Three to four million tonnes per month of fertilizer is stalled. Per CNBC, urea FOB Egypt has risen from $400 pre-war to $700 per tonne. Per Reuters, Brazil’s urea imports have fallen 33% year over year. Bangladesh has shut four of five fertilizer factories. India has cut output at three urea plants. The United States is running 25% short of fertilizer supply for spring planting. The World Food Programme projects 45 million people could enter acute hunger within months. The 2022 Ukraine crisis pushed 70 million into hunger over 18 months. This onset is faster. This is the food story. Aluminum, helium, and sulfur markets are all in supply shock. Helium is essential to semiconductor manufacturing. Indonesia sulfur prices are up over 80%, prompting nickel producers to cut output for EV batteries. This is the industrial story. President Trump rejected Iran’s response Monday as “totally unacceptable” and “a piece of garbage.” He said the ceasefire is “on massive life support.” A US Navy Ohio-class nuclear-armed submarine arrived in Gibraltar Sunday. Trump arrives in Beijing on May 14 and 15. A 1,150% sulfuric acid move in China. A 45-million-person acute hunger projection. A US strategic reserve approaching 1982 lows. An OECD inventory cliff in June. A fertilizer famine in three months. A market at all-time high. The market priced one shock. There are three. The summit two days away decides which of them gets resolved first. open.substack.com/pub/shanakaans…

UAE gas plant hit by Iranian attacks will not be fully repaired until 2027 ft.trib.al/XWLr41q

Even if both sides manage to reach an agreement, the economic damage caused by the Strait of Hormuz’s closure cannot be undone. We show the effects it has had so far economist.com/interactive/gr…

Adds: "Our analysis now suggests that oil prices should remain in the low $100s for most of the rest of this year, averaging $97 for 2026 as a whole. Crucially, the analysis does not point to a quick normalization once the Strait reopens. Even assuming flows resume in early June, it implies a market that stays structurally tight well into the second half of the year."

The Russian government has cut its real GDP growth forecast for 26’ to 0.4% from 1.3%. Even this looks optimistic as the economy is in recession. So much for higher oil prices because of the Iran war boosting the Russian economy.

Why are oil prices not higher ? Via Morgan Stanley's Martijn Rats & team 1) market had significant buffers before the start of the war 2) market expects the Strait to re-open soon 3) seaborne oil exports from the US have surged unexpectedly 4) China has (also unexpectedly) cut its imports of seaborne oil , down 5.5mbd in the last month- drawing down on inventories instead => The rise in seaborne exports from the US and decline in imports into China has absorbed 9.3 mb/d of the 12.3 mb/d YoY Middle East decline, shielding the rest of the world But: analysts warn a 'sustained closure could cause renewed tightness'. Bull Case $130-150

MUST READ: The cost of a real-world oil cargo is dropping fast as buyers back away. The sharp retreat provides a counterintuitive backdrop to warnings the oil market is barreling toward a crisis point. Still, traders cautioned the calm may be shortlived. bloomberg.com/news/articles/…

This article by Robert Kagan is worth reading. It is a searing assessment of the catastrophic failure of the Israel-U.S. war on Iran, calling it a defeat. It is also perhaps best captures how Iran sees things and why it is not submitting to Trump’s demands in the talks 👇🏼 “There will be no return to the status quo ante, no ultimate American triumph that will undo or overcome the harm done. The Strait of Hormuz will not be “open,” as it once was. With control of the strait, Iran emerges as the key player in the region and one of the key players in the world. The roles of China and Russia, as Iran’s allies, are strengthened; the role of the United States, substantially diminished. Far from demonstrating American prowess, as supporters of the war have repeatedly claimed, the conflict has revealed an America that is unreliable and incapable of finishing what it started. That is going to set off a chain reaction around the world as friends and foes adjust to America’s failure. President Trump likes to talk about who has “the cards,” but whether he has any good ones left to play is not clear. The United States and Israel pounded Iran with devastating effectiveness for 37 days, killing much of the country’s leadership and destroying the bulk of its military, yet couldn’t collapse the regime or exact even the smallest concession from it. Now the Trump administration hopes that blockading Iran’s ports will accomplish what massive force could not. It’s possible, of course, but a regime that could not be brought to its knees by five weeks of unrelenting military attack is unlikely to buckle in response to economic pressure alone.” theatlantic.com/international/…

Opinion: France has some of the greenest energy on Earth – all thanks to its decision, after the oil shock of 1973, to stop relying on expensive fossil fuels from the unreliable Gulf. Now, others could follow ft.trib.al/de5d4gb ⁠

🚨 THE WORLD RUNS THROUGH 8 STRAITS Trade, Oil, LNG, Military power. Key chokepoints: • Malacca ~25% of global traded goods • Hormuz ~25% of global oil, ~⅓ of LNG • Singapore ~50% of global seaborne trade • Gibraltar Atlantic ↔ Mediterranean • Bosphorus Black Sea outlet • Magellan Atlantic ↔ Pacific backup • Bering Arctic gateway • Bass Australian passage These are pressure points. Close Hormuz... Oil spikes. Disrupt Malacca... Asia freezes. Block Bosphorus... Black Sea trade halts. Geopolitics isn’t abstract. It’s maritime geometry. #oott #commodity #trade

I have updated my supply chain models that I built in the below note, and let me say it as clear as I can: It is going to be a disaster. On par with 2022. Check out what I built in the below note, and stay tuned for update in Sunday's weekly.

From Bloomberg: “Executives across retail, restaurants and packaged goods are increasingly worried about US shoppers with tighter budgets amid surging gas prices caused by the conflict in the Middle East. “They’re literally running out of money at the end of the month,” Kraft Heinz Co. Chief Executive Officer Steve Cahillane said in an interview this week. “We’re seeing negative cash flows in the lower-income brackets where they’re dipping into savings.” #economy

Premature obituaries for populism — Edward Luce ft.trib.al/BSJr9HH

For years, many Russians cheered on Vladimir Putin’s full-scale invasion of Ukraine in a wave of nationalist fervor. Others kept silent, fearful of the state cracking down against even mild criticism of the social and economic fallout bloomberg.com/news/articles/…

According to CNBC, Wall Street has a new acronym: NACHO, or “Not A Chance Hormuz Opens.” #economy #markets @cnbc

At some point, the Strait of Hormuz will reopen and oil prices will fall back to pre-war levels. But the latest rise in long-term yields won't get reversed. Every shock that happens permanently ratchets up global fiscal stress. A one-way train of debt... robinjbrooks.substack.com/p/a-world-of-d…

WAR ENDS TODAY? DOESN'T MATTER - MASSIVE DISRUPTIONS LOCKED IN SAYS CURRIE Commodities expert Jeff Currie drops hard truth on the energy markets. Even if peace breaks out in the next five minutes, the damage is done. Global supply chains have been shattered across oil, gas, fertilizer, metals and more. This disruption will take months to unwind and no quick policy fix can stop it. THE BAKED IN CHAOS ➡️ Ships are in the wrong places with insurance policies being canceled everywhere. ➡️ Pressure has been taken off key fields in Saudi Arabia, Iraq and the UAE. ➡️ The list of impacts goes on and on with damage that cannot be reversed overnight. THE NUMBERS DON'T LIE ➡️ Strategic reserve releases of 400 million barrels sound impressive but are minuscule. ➡️ They offset almost nothing against a net disruption of around 18 million barrels per day. ➡️ It would take 200 days just to move that reserve volume at max flow rates. THE HOARDING DANGER ➡️ China has been rewarded for hoarding aggressively over the last year. ➡️ Japan, Korea and individual drivers are now topping up tanks far earlier than normal. ➡️ This extra demand spike could add millions of barrels per day just like the 1970s crisis. REGIME CHANGE IS HERE ➡️ We are leaving the asset-light tech boom world for a new asset-heavy reality. ➡️ Own hard assets like oil, metals and gold as everything gets repriced higher. ➡️ This geopolitical shift mirrors the post-dot com boom move into commodities. THE ENERGY DOMINANCE PARADOX ➡️ America may look safe as a net exporter at the cash flow level. ➡️ But at wealth and credit levels the US is highly vulnerable with energy at just 3% of markets. ➡️ Sanctions have turned the old petrodollar shock absorber into a shock amplifier. THE BOTTOM LINE Jeff Currie makes one thing crystal clear: the world's crude policies have changed permanently. Even if the war stops immediately, the shortages and repricing are already baked in for the USA and global economy. Get ready for the revenge of the old economy. #JeffCurrie #OilCrisis #SupplyChainChaos #EnergyShortages #CommoditiesBoom #HoardingPanic #HardAssetsNow