Dear Reader,
Good morning.
Simmy Adelman here with Behind the Markets, and A LOT happened yesterday that we need to talk about
Oil hit $90 a barrel.
The US just entered day nine of strikes on Iran.
And the interim peace deal that briefly gave markets hope last week is dead.
The International Energy Agency has called what's happening in the Strait of Hormuz the largest oil supply disruption in the history of global energy markets.
Larger than the 1973 Arab embargo.
Larger than the Gulf War in 1990.
And yet, many investors are barely paying attention.
The stock market has been resilient enough that people stopped asking hard questions.
But that's usually the moment when the hard questions matter most.
The Largest Oil Supply Disruption in History
On March 4th, Iran declared the Strait of Hormuz closed.
The Strait carries roughly 20% of global oil supply every single day.
Since then, the US and Israel have been conducting military strikes on Iran.
Unfortunately, we lost two US service members over the weekend.
Iran is expanding strikes to Syria and Bahrain.
And yesterday, the interim peace deal that markets had been counting on collapsed entirely.
A few things have cushioned the blow so far.
Countries drew down strategic petroleum reserves.
Production outside the Gulf ramped up.
And markets have been distracted between the AI boom, SpaceX IPO, and earnings season.
There has been no shortage of things to focus on other than a war in the Middle East that most Americans feel very far away from.
But here's the thing about energy shocks.
They don't announce themselves cleanly.
They build.
They compound.
And by the time the average investor notices them, the damage to their purchasing power is already done.
And one of the hardest questions worth asking right now is this: why does the entire global economy still depend on oil flowing through a 21-mile-wide waterway controlled by a hostile nation?
We’ve been thinking about this for months.
And what we keep coming back to is an energy source that has nothing to do with the Middle East, nothing to do with OPEC, and nothing to do with whatever happens in the Strait of Hormuz tomorrow.
It comes from the heat at the center of the Earth.
It's available everywhere.
It never runs out.
And it never gets caught in a war zone.
We just published a full report on what we think is the most overlooked energy opportunity in the entire AI buildout — and moments like this one are exactly why we wrote it.
What $90 Oil Actually Means
Most people think about oil as a gas station problem.
Fill up the tank, pay more, move on.
But oil touches everything.
It costs more to manufacture products.
It costs more to ship them.
It costs more to heat your home, to cool your office, to run a data center.
Every dollar increase in oil is effectively a tax on the entire economy.
The Dallas Fed ran the numbers on a scenario where the Strait stays closed through fall.
Their finding: a sustained disruption of this magnitude could push US inflation meaningfully higher and force the Fed to keep rates elevated longer than markets are currently pricing.
We talked a couple weeks ago about Kevin Warsh and the new Fed.
Already hawkish.
Already signaling rates stay high.
Add an oil shock that won't quit and you have a very uncomfortable equation for stocks — especially growth stocks and tech, which are already under pressure.
The Part Nobody Is Talking About
Yesterday, Energy Secretary Chris Wright said Hormuz tolls — the idea of charging ships a fee to transit the strait — are off the table.
That's a reversal from what was being floated just days ago.
The assumption baked into most market models right now is that this gets resolved by early 2027.
The IMF's forecast, published two weeks ago, assumes the Strait begins reopening in mid-July and normalizes by March 2027.
That assumption is looking shakier by the day.
What This Means for You
The market is giving you a clue right now.
Oil at $90 while a peace deal collapses and strikes continue is the market telling you something.
It's saying the easy part of the energy price recovery may be over.
It's saying inflation — which everyone assumed was on its way back down — has a new wildcard.
And it's saying that the Fed, which was already in no hurry to cut rates, now has even less reason to do so.
None of this means a crash is coming.
What it means is that the risk nobody is pricing carefully enough right now is sitting in a 21-mile-wide waterway between Iran and Oman.
If you own companies that depend on cheap money, long-duration growth stocks, or anything with supply chains running through the Gulf — this is a good week to take a hard look at your exposure.
I know we have.
The stock market has been remarkably resilient.
Resilience has a way of making people comfortable right before something changes.
Have a wonderful Tuesday.
I'll see you tomorrow.
All the best,
Simmy Adelman, Editor-in-Chief
Behind the Markets
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Written by Simcha Adelman