Hi YXI friends,

Global macro now boils down to this chart below: the Strait of Hormuz traffic.

The current situation is the mirror opposite of the COVID times. During COVID, there was a demand destruction for oil, which drove the price down. Now, we have supply destruction in oil, which could keep oil prices extremely high for at least a few weeks.

The scary part is that the situation is nearly impossible to model, given the ever-changing dynamics on the ground and among policymakers on both sides. Inevitably, this will feed into the economic data as well as actual businesses. For example, critical materials for chip manufacturing, such as helium, are produced in large quantities in Qatar. The regional conflict could create supply chain bottlenecks for semis, thereby impacting Q1-Q2 earnings for AI stocks.

Housekeeping: Today, I’ve added a different style to our chart analysis, without the EWT annotations and drawings. The aim is to look at the bigger picture and assess the raw price x volume.

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