SPEAKER_00 0:00

Usually when we think about global markets, we picture this um this massive decentralized web, right? Something capable of absorbing localized shocks.

SPEAKER_01 0:09

Right. Yeah.

SPEAKER_00 0:10

But right now, that entire system is being pulled super taut by just one single thread. Welcome to your April 23 deep dive.

SPEAKER_01 0:18

Glad to be here.

SPEAKER_00 0:19

So today's mission, we are unpacking a really fascinating pre-market briefing by Eli Levy over at Canon Trading Company. You want to figure out how one geographic choke point is basically rewiring global commodities.

SPEAKER_01 0:33

And that choke point, um, it's the Strait of Hormuz. We're looking at a scenario where 9.1 million barrels per day are just completely shut in right now.

SPEAKER_00 0:41

Aaron Powell Wow. Which, to put that into perspective for you, that is a roughly 9% of the entire global oil supply. Just banished.

SPEAKER_01 0:49

Exactly. It's massive. And Brent Crude is already sitting near$98 with the EIA actually projecting it could hit a$115 peak in the second quarter. Trevor Burrus, Jr.

SPEAKER_00 0:58

That is just wild. It's well, it's exactly like a blocked artery. The Strait of Hormuz isn't just a shipping lane, you know, it is the global economy's carotid artery. Everything downstream is losing oxygen.

SPEAKER_01 1:08

Aaron Powell That's a perfect analogy. When you pinch the carotid artery, it doesn't just hurt the neck. I mean, the brain, the limbs, all the secondary organs start shutting down.

SPEAKER_00 1:17

Aaron Powell Right, which perfectly tees up the broader market impact we're seeing right now.

SPEAKER_01 1:21

Yeah.

SPEAKER_00 1:22

But uh before we diagnose those secondary failures, I need to jump in with a quick required note. Disclaimer. Trading futures, options on futures, and retail off-exchange foreign currency transactions and other financial instruments involve substantial risk of loss and are not suitable for all investors. Past performance is not indicative of future results. Carefully consider if trading is suitable for you in light of your circumstances, knowledge, and financial resources. You may lose all or more of your initial investment. Opinions, market data, and recommendations are subject to change at any time.

SPEAKER_01 1:56

Okay, so back to that walked artery. The pressure building there is really driven by this intense geopolitical gridlock.

SPEAKER_00 2:02

Definitely. And looking curely at the geopolitical chessboard right now, just reading the signals. Exactly. Stating clearly that we take no political signs here whatsoever. We are merely reporting the geopolitical realities shaping oil prices. But we have President Trump extending a ceasefire with Iran on one side.

SPEAKER_01 2:21

Right. And then Vice President Vance canceling a planned trip to Islamabad on the other.

SPEAKER_00 2:26

Yeah. So whatever your politics are, the market is just pricing in sustained gridlock in the region.

SPEAKER_01 2:31

Aaron Powell And that gridlock is what causes those downstream organ failures we're talking about. A constrained energy supply, it acts like a massive tax on the broader economy. It just drives up inflation.

SPEAKER_00 2:42

Which leads to a really fascinating contradiction. I mean, if you're watching your portfolio right now, you might be scratching your head.

SPEAKER_01 2:47

Oh, for sure.

SPEAKER_00 2:48

Wait, aren't gold and silver supposed to be safe havens during a war? Why on earth are they down like 10 to 15%?

SPEAKER_01 2:54

Yeah, it seems totally counterintuitive, right? Until you follow the inflation dominoes, that rising inflation from the oil shock forced the incoming Fed share nominee, Kevin Walsh, to take a really hawkish stance at his hearing. He signaled a new inflation framework. So that means interest rates are staying higher for longer.

SPEAKER_00 3:14

Right. And higher rates lift the US dollar. And since metals like gold and silver are priced in dollars globally, a surging dollar just makes those metals wildly expensive for foreign buyers.

SPEAKER_01 3:25

Spot on. The only major outlier in the metals right now is copper, which actually hit two month highs.

SPEAKER_00 3:34

Oh, really? Why copper?

SPEAKER_01 3:36

Traders are actually pricing in some optimism over U.S. Ron diplomacy there.

SPEAKER_00 3:40

Okay, got it. But you know, the most surprising downstream failure to me isn't even in metals, it's in agriculture.

SPEAKER_01 3:47

Yeah, the grain situation is intense.

SPEAKER_00 3:49

I mean, I expected the energy shock, but the collateral damage to U.S. farmers is severe. The briefing notes that farmers now need 164 bushels of corn just to pay for one single ton of urea fertilizer. That is a staggering cost ratio.

SPEAKER_01 4:04

It's brutal, and the mechanism behind that ratio goes directly back to our blocked artery. Nitrogen fertilizers like urea and ammonia, they require massive amounts of natural gas to produce.

SPEAKER_00 4:14

Oh, so because the Strait of Hormuz is a major artery for liquefied natural gas, too, not just crude oil.

SPEAKER_01 4:20

Exactly.

SPEAKER_00 4:21

Choking it off stars the world of the fundamental feedstock needed to make fertilizer. It's not just fuel for the tractors, it's the chemical building block for the crops.

SPEAKER_01 4:31

You nailed it. So if we synthesize all this, every road leads back to Hormuz. The blockade is the master variable here, and a hawkish Fed holding the dollar strong is dictating the flow of the entire commodity complex.

SPEAKER_00 4:45

Huge thanks to Eli Levy at Canon Trading Company for doing the heavy lifting on this data. If you want to dig deeper, you can reach him directly at Eli at Canon Trading.com.

SPEAKER_01 4:54

But we will leave you with this provocative thought to mull over. If 9% of the global oil supply remains trapped, well, how long can the global economy actually absorb this shock before forced demand destruction turns into a severe global recession?

SPEAKER_00 5:07

Something to seriously ponder as you watch these markets. Thanks for tuning in to the deep dive. Disclaimer: Trading futures, options on futures, and retail off-exchange foreign currency transactions and other financial instruments involve substantial risk of loss and are not suitable for all investors. Past performance is not indicative of future results. Carefully consider if trading is suitable for you in light of your circumstances, knowledge, and financial resources. You may lose all or more of your initial investment. Opinions, market data, and recommendations are subject to change at any time.