Macro Voices

MacroVoices #528 Luke Gromen: Hormuz Could Lead To a 1956 US Suez Moment

1h 34min

This episode of Macro Voices features Luke Gromen and Rory Johnston discussing the escalating Iran crisis and its profound implications for global markets. They argue that market complacency is dangerously underestimating the severe, non-linear supply chain disruptions caused by the Strait of Hormuz closure, likening it to a potential 1956 US Suez moment. The discussion highlights the lag effects of oil supply, the looming food inflation from fertilizer shortages, and the inevitable fiscal stress that could force governments into inflationary money printing.

Summarized by Podsumo

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✨ Key Takeaways

1

The continued closure of the Strait of Hormuz is seen as the central issue, accelerating towards a "non-linear break" in global supply chains, despite market perceptions of an "all-clear" signal.
2

The actual disruption of crude oil supply to global markets has not yet begun; oil shipped before the crisis (February 28th) is only now arriving, creating an impending "air pocket" of scarcity that will hit different regions over the next six weeks.
3

Financial markets are dangerously complacent about the severity and duration of the crisis, underestimating its existential implications for global powers like China and Russia, and the potential for severe food and energy inflation.
4

Governments will likely be forced to subsidize critical supplies (food, energy) due to humanitarian crises, exacerbating existing debt problems and leading to inflationary money printing to cap bond yields, a dynamic already observed in Japan's JGBs.
5

Evidence suggests Iran's military capabilities and accuracy are underestimated, with successful strikes against US assets, and authorities are actively managing markets to prevent bond and oil prices from reaching problematic levels.

💬 Notable Quotes

"Is Hormuz open or is Hormuz closed? And as long as it's still closed, we are accelerating non-linearly toward a really bad outcome."

— Luke Gromen
"My worst case scenario was that this could end up being a US Suez 1956 moment. And now seven weeks in, Hormuz is still closed."

— Luke Gromen
"The only way I would adjust that is to say that I've been describing it essentially the air pocket moving through the global system. Basically that last tanker after it reaches your, your, your kind of arrival ports and there's nothing behind it but air. That's when you start feeling the scarcity in real time."

— Rory Johnston