5 ms·

> The stock market keeps going up in the face of the indefinite closure of Hormuz Why wouldn’t it? The closure leads to price increases which leads to inflatio

> The stock market keeps going up in the face of the indefinite closure of Hormuz Why wouldn’t it? The closure leads to price increases which leads to inflation which leads to non-dollar assets (ie stocks going up in value) Second from a US perspective the strait matters the least it has since world war 2. If the price stays high a bunch of fracking will come back online.

rhubarbtree 5mo ago
Because uncontrolled inflation will destroy your economy
- virgil_disgr4ce 5mo ago
  yes, but that's future us's problem
  - notpachet 5mo ago
    Another strong contender for humanity's epitaph
  - kermatt 5mo ago
    It is more than one fiscal quarter away. May as well be a lifetime.
kalkin 5mo ago
> The closure leads to price increases which leads to inflation which leads to non-dollar assets (ie stocks going up in value) I think this argument proves too much. Historically energy shocks have led to recessions, and in recessions the stock market usually doesn't go up. And the US economy is certainly exposed to global recession regardless of whether we're a net exporter of fossil fuels.
- ericmay 5mo ago
  Well, there are quite a number of factors. I think you're right that "it's inflation" is a little too simple, but it does seem to be at least a significant factor, in my opinion. The Strait of Hormuz is, basically not a big deal unless you're driving your big ole' truck. Americans are price sensitive and so some companies will have to absorb pricing increases, customers will absorb some others, and so forth. In other words, business as usual. Of course the closure of the Strait is a big problem for most of the rest of the world. They better get on with figuring out how to get Iran to stop being so chaotic in the region or we'll just keep it shut down indefinitely. No big deal. Because the United States has so many advantages (primary global reserve currency, robust and efficient capital markets, highly sophisticated and dynamic economy across all sectors except luxury goods, &c.) it's able to weather these storms much easier than most other countries. As a country that also imports so much, if we spend less on imported products that's less of a problem than not being able to sell products. A recession isn't great, but the current parameters seem to suggest to me it's less of a problem for the United States - perhaps why we're in part seeing stock market valuations continue to climb.
  - thfuran 5mo ago
    >The Strait of Hormuz is, basically not a big deal unless you're driving your big ole' truck Are you serious? Even ignoring the other things that ship through there, a significant disruption to global energy supply is significant to most people. If you're not driving a truck, you're probably using goods that contain plastic or took energy to produce or were moved from one place to another in fuel-powered vehicles. If, somehow, you're not, you're probably using services that are.
    - macintux 5mo ago
      Not to mention the countries heavily reliant on LNG from Qatar that are facing a very difficult time.
      - ericmay 5mo ago
        The best course of action now is to spend less time criticizing the United States and more time working with the United States, sending assets, military capabilities (if able), or at least providing political and diplomatic support &c. to stop the Iranians. The world let this disease (IRGC) fester in the region for too long, and now because of that the fix is going to require significant pain. The IRGC in its current form has run its course and will not be allowed to threaten American interests, allied interests (whether that's Israel, UAE, Saudi Arabia, or otherwise), and they will not be permitted to build a nuclear weapon or threaten global trade.
- jpiasetz 5mo ago
  The shock is smaller, and oil’s importance is less so less likely to cause a recession. In the 70 price went up 400% and oil was rough 1.5x more important. Today price up 100% so the past oil shock was 6x larger
  - thephyber 5mo ago
    You are pretending like the oil crisis of 26 has already run its course. In the 70 crisis, we have the hindsight of several years of how it played out. We don’t even have 1 week of data after the last ship leaving the Strait docked in the US. Also, the US SPR was created in 1975, so we are going to get to see if it actually works to absorb an oil shock like this. Most likely there will be some places which are almost unaffected while others are going to see unaffordable price spikes (more than 400%). The pain won’t be spread evenly.

rhubarbtree 5mo ago

Because uncontrolled inflation will destroy your economy

virgil_disgr4ce 5mo ago
yes, but that's future us's problem
- notpachet 5mo ago
  Another strong contender for humanity's epitaph
- kermatt 5mo ago
  It is more than one fiscal quarter away. May as well be a lifetime.

kalkin 5mo ago

> The closure leads to price increases which leads to inflation which leads to non-dollar assets (ie stocks going up in value) I think this argument proves too much. Historically energy shocks have led to recessions, and in recessions the stock market usually doesn't go up. And the US economy is certainly exposed to global recession regardless of whether we're a net exporter of fossil fuels.

ericmay 5mo ago
Well, there are quite a number of factors. I think you're right that "it's inflation" is a little too simple, but it does seem to be at least a significant factor, in my opinion. The Strait of Hormuz is, basically not a big deal unless you're driving your big ole' truck. Americans are price sensitive and so some companies will have to absorb pricing increases, customers will absorb some others, and so forth. In other words, business as usual. Of course the closure of the Strait is a big problem for most of the rest of the world. They better get on with figuring out how to get Iran to stop being so chaotic in the region or we'll just keep it shut down indefinitely. No big deal. Because the United States has so many advantages (primary global reserve currency, robust and efficient capital markets, highly sophisticated and dynamic economy across all sectors except luxury goods, &c.) it's able to weather these storms much easier than most other countries. As a country that also imports so much, if we spend less on imported products that's less of a problem than not being able to sell products. A recession isn't great, but the current parameters seem to suggest to me it's less of a problem for the United States - perhaps why we're in part seeing stock market valuations continue to climb.
- thfuran 5mo ago
  >The Strait of Hormuz is, basically not a big deal unless you're driving your big ole' truck Are you serious? Even ignoring the other things that ship through there, a significant disruption to global energy supply is significant to most people. If you're not driving a truck, you're probably using goods that contain plastic or took energy to produce or were moved from one place to another in fuel-powered vehicles. If, somehow, you're not, you're probably using services that are.
  - macintux 5mo ago
    Not to mention the countries heavily reliant on LNG from Qatar that are facing a very difficult time.
    - ericmay 5mo ago
      The best course of action now is to spend less time criticizing the United States and more time working with the United States, sending assets, military capabilities (if able), or at least providing political and diplomatic support &c. to stop the Iranians. The world let this disease (IRGC) fester in the region for too long, and now because of that the fix is going to require significant pain. The IRGC in its current form has run its course and will not be allowed to threaten American interests, allied interests (whether that's Israel, UAE, Saudi Arabia, or otherwise), and they will not be permitted to build a nuclear weapon or threaten global trade.
jpiasetz 5mo ago
The shock is smaller, and oil’s importance is less so less likely to cause a recession. In the 70 price went up 400% and oil was rough 1.5x more important. Today price up 100% so the past oil shock was 6x larger
- thephyber 5mo ago
  You are pretending like the oil crisis of 26 has already run its course. In the 70 crisis, we have the hindsight of several years of how it played out. We don’t even have 1 week of data after the last ship leaving the Strait docked in the US. Also, the US SPR was created in 1975, so we are going to get to see if it actually works to absorb an oil shock like this. Most likely there will be some places which are almost unaffected while others are going to see unaffordable price spikes (more than 400%). The pain won’t be spread evenly.