Strait Talk

Chief Strategists Matt Gertken and Roukaya Ibrahim and Jesse Kuri discussed:

• Presidents Trump and Xi Jinping agreed to expand their trade truce, as both face challenges, not least in the Strait of Hormuz.
• But China is not yet willing to apply pressure on Iran to enable shipping to resume in the strait. Only the US and Iran have the physical power necessary to resume shipping.
• Trump's attempt to negotiate a quick deal with Iran has not borne fruit, though negotiations are not yet dead.
• Faltering diplomacy implies a new round of hostilities over the coming days and weeks.
• Hormuz is likely to remain shut and attacks will likely increase over the coming month.
• In late June the world will start to hit constraints from physical oil inventory drawdowns.
• The global economy will increasingly see demand destruction as a result of elevated commodity prices.
• Global financial markets are increasingly disconnected from the underlying threat to the economy.