MAGA globalism
Supply shocks all around
US war aims in the Gulf have seemingly pivoted to reopening the Strait of Hormuz, a problem the world did not have before the US decided to go to war at the beginning of the month. Markets continue to gyrate on the basis of comments and artificial deadlines set by President Trump, but as Robert Pape argues, those statements should be heavily discounted in favour of US actions on the ground.
Those actions are not consistent with an end to the conflict anytime soon. They are more consistent with dramatic escalation. The prevailing market assumption that there is an economic pain threshold at which Trump will walk away, even without a decisive outcome, is mistaken.
The longer the Strait is effectively closed, the more lasting the supply disruption it will leave in its wake. Those disruptive effects will be highly non-linear given the flow-on effects to the many industries downstream of the petrochemical complex. Polymarket gives only a ~30% implied implied probability of Strait traffic returning to normal by the end of next month.
