Lobo Tiggre: War Is Inflationary, the Strait Is Closed & Markets Are Asleep!
Summary
- Geopolitical conflict and war are inherently inflationary because destroyed infrastructure and munitions require massive capital to replace.
- The market is dangerously complacent regarding the closure of the Strait of Hormuz, with broad equities remaining near all-time highs despite severe supply chain and energy risks.
- Central banks and BRICS nations are structurally shifting away from the US dollar, providing a long-term floor for monetary metals.
- Volatility driven by short-term news (e.g., Fed rate fears or geopolitical tweets) should be viewed as a buying opportunity for hard assets, rather than a reason to panic sell.
Trade Ideas
"I don't just mean oil shock, though obviously that's a factor... They've closed a straight of Hormuz." The Strait of Hormuz is one of the world's most critical chokepoints for global oil transit. Its closure directly restricts physical supply to the global market. As long as rockets are being fired at ships and the strait remains impassable, the physical shortage will drive up the underlying price of crude oil. LONG USO to capture the upside of energy supply shocks caused by Middle Eastern conflict. Geopolitical de-escalation or a single tweet signaling a ceasefire can cause violent, immediate downside reversals in oil prices.
"They've closed a straight of Hormuz and it is just astounding to me how close the S&P remains to all-time highs in this context." The broader equity market is currently pricing in a perfect "soft landing" and ignoring severe geopolitical tail risks. The closure of major global shipping chokepoints will inevitably lead to supply shocks and higher input costs for corporations. Because these risks are not priced in, broad market indices are highly vulnerable to a sudden repricing event. AVOID SPY, as the risk/reward ratio is skewed negatively due to extreme market complacency in the face of escalating global conflict. The market could remain irrational longer than expected, or a sudden, unexpected peace resolution could trigger a massive relief rally.
"I'm very bullish on gold and silver in particular... anything that governments can't print or lend into existence gets a tailwind here." War is highly inflationary due to the constant need to replace destroyed materials and munitions. Combined with BRICS nations moving their financial lifeblood away from New York and central banks continuing to buy, fiat currencies will face sustained pressure. This creates a structural, long-term tailwind for monetary metals that cannot be inflated away by central banks. LONG GLD and SLV as core safe-haven assets to protect against geopolitical inflation and fiat debasement. Short-term volatility driven by Fed rate hike fears or algorithmic trading based on geopolitical headlines could cause temporary, sharp drawdowns.
