Impasse at Hormuz
The Strait’s closure cannot be quickly resolved. The damage to the world’s economy is immense, destroying fiat currencies. That’s why gold is the only pure safe haven.
Introduction
Even America’s NATO partners openly admit that the conflict with Iran was ill-advised. And it is clear that the campaign has failed and a face-saving exit is being sought by the US: that’s why threats are followed by deadlines being extended. Don’t forget that this campaign was originally meant to be resolved over a weekend — and here we are in an uneasy truce two months on with the Hormuz Straits closed.
Iran knows it has control over the situation. It also has the conditional backing of China and Russia. This is why it is in no hurry to compromise. Stalemate.
The rest of the world will have to dig in, for Hormuz will be closed for the foreseeable future which could be months. The best hope is that the US quietly backs down without appearing to, and that Israel doesn’t force Iran to retaliate. The situation remains extremely fragile.
Economic consequences
Not only are supplies of energy and essential commodities being withheld from global markets, but other exporting nations of these commodities are curbing their supplies to protect their own industries. China is a prime example likely to be followed by others. The X tweet below by Lucas Ekwueme shows how the combination of Gulf and Chinese export restrictions is intensifying the consequences of the blockade.
Secondary effects of the energy crises are hitting commodity markets. Sulphuric acid whose global supplies are being more than halved is essential for fertiliser production, leaching copper, nickel, and uranium from ore, and chemical manufacturing to mention a few. Soaring energy prices affect energy-intensive production of commodities such as aluminium. JPMorgan recently warned of a two million tonne aluminium deficit driving prices above the 2022 price spike.
Directly and indirectly, every commodity and every economy is affected. There is no doubt that higher commodity prices will lead to a vicious combination of economic slump and higher prices, forcing G7 central banks to expand credit without limit to pay for them. Virtually all G7 nations are in debt traps making the expansion of credit unfundable, other than through very short-term debt instruments.
This is the hyperinflation playbook — a collapsing economy with a collapsing
