Shockwaves from Oil, Tariffs, and the Fed Are Hitting the Markets

The markets have been quite choppy since I last wrote, but the underlying geopolitical and macroeconomic conditions have hardly been calm and stable. Israel’s attack against Iran’s nuclear infrastructure has triggered a massive rally in oil, and depending on how the situation plays out, we may well see oil prices back above $95.00 per barrel. Considering the fact that oil was trading at $55.39 per barrel just six weeks ago, we have already had a massive move just to reach the current level of $73.50 per barrel. The oil market was extremely oversold and ready for a sharp recovery in any event, but the recent military conflict certainly accelerated the move.  There remains a great deal of uncertainty as to how the situation with Iran plays out, but it is very easy to imagine a scenario in which a desperate Iranian regime tries to create global chaos by blocking the Strait of Hormuz, at which point we could even see oil prices over $100 per barrel.    

If Iran were to block the Strait of Hormuz, the global markets would likely experience immediate and significant turbulence. Here's how the shockwaves would ripple through the system: