Geo Chen
· Fidenza Macro
· June 17, 2026 at 10:01
· ⏱ 5 min read
| Read on Substack ↗
Summary
The Iran-US memorandum of understanding represents a strategic defeat for the US, unfreezing Iranian assets and potentially imposing tolls on Strait of Hormuz traffic, while China's demonstrated ability to swing 3-4 million barrels per day of crude demand caps oil prices and makes $150 oil unlikely. Separately, the author argues AI token consumption is growing 1-2 orders of magnitude annually, widening the premium for frontier models, and incoming Fed chair Warsh may increase policy uncertainty.
•The US and Iran will sign a 14-point MOU restoring Strait of Hormuz traffic to pre-war levels, lifting US sanctions and unfreezing billions in Iranian funds without requiring Iran to give up uranium.
•Iran may charge tolls on transit through the Strait of Hormuz, potentially generating a large new revenue stream, though this would violate the UN Convention on the Law of the Sea.
•A $300 billion reconstruction fund for Iran (equal to one year of its GDP) has been reported but not confirmed by JD Vance.
•China has the ability to swing 3-4 million barrels per day of crude demand for months at a time through engine switching and demand-shifting, effectively capping oil prices even in extreme scenarios.
•The author concludes that if $150 oil could not be achieved during the Iran war, it is unlikely to be achieved in real dollar terms, suggesting oil has become an 'optional hydrocarbon' at the margin.
•Incoming Fed chair Warsh may remove the dot plot and reduce communication, potentially increasing volatility, and his preferred inflation measure (Dallas trimmed mean at 2.3%) is one of the lowest the Fed considers.